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Real Estate Questions and Answers

 

If you have a question which is not covered by this list, then please ask Dot. Besides getting an answer, your question may get added to the list and help someone else.


Questions about Dot's Services and this Website

  • General Questions

    1. Can Dot help me with a property outside the Golden Triangle area ?

      Yes, but indirectly. The best thing Dot can do to help you with property in another real estate board area is to refer you to a top-rated agent in that area. It is not in your best interest, or hers, to try to get Dot to work for you in an area located far away, or one she is unfamiliar with. Dot can find you a good agent, based on peer recommendations, for most cities in Canada. Please feel free to ask for a referral - there is no charge to you, and nothing gets added to the commissions paid.

    2. How do I get a Radon inspection ?

      People are concerned about leakage of radon gas into basements and other underground areas of their homes because radon is radioactive. Generally radon is not a problem except in areas where the underground structure contains significant quantities of granite or shale. If you would like to find out whether or not your home has a radon problem you can have an inspection done. It ought to cost in the region of $50 - $100. If you are considering the purchase of a home and are concerned about radon, then ask the home inspector to provide a report. Radon analysis is not normally part of a home inspection, but should be available as an extra by request from most reputable home inspectors, especially in areas where radon is a concern.

  • Website

    1. Why do I have to fill in personal information to find out about the price of a sold property ?

      In theory, we could just give out that information, but there are a couple of problems with that. One is that we haven't got a search engine to automatically deliver the answer, so Dot has to get in touch somehow to give you the information. Another is that the answer to this question (what price did it sell for) could be considered kind of private, even if it is in the public domain, so we don't like to give it out indiscriminately. Getting to discuss it with you at some level helps to establish that you have some legitimate need besides nosiness or idle curiosity. That is part of the ethics of the real estate profession. Those ethics are in place to protect you, so we hope you will understand and respect them.

    2. How up to date is your property search ?

      It is frequently updated and is essentially the same information used by agents throughout the area to locate homes for you. It should normally show property as soon as or sooner than most other publicly available property searches.

    3. Why should I use your search rather than any other ?

      If you have read through this site then you will understand when we say you shouldn't be using any search engine. You should get an agent of your own to act for you. It costs nothing, saves work and gives you an edge by turning up new listings sooner. If you are determined to use a search engine then this is a good one to choose because:

      • it shows all available homes in the area except for FSBO sales and exclusive listings, not just the ones Dot, or Team Realty K/W Inc has listed
      • the community search offers the convenience of selecting areas from both the Kitchener-Waterloo and the Cambridge areas in one search
      • it is updated regularly, and it is gives fast results

    4. Why do you just give street names and not addresses on your search ?

      We could put the full address on, as well as lots of other information, but it would be more work and take up more space. By showing only limited information we make it impractical to exploit the search for targeted marketing (eg. removals, cleaning, painting ...). We also want to encourge you to contact Dot for the full details in the hope that she might be the agent you choose to assist you.

    5. Why do you just show ten results ? Why not let me scroll through all the results, or even through the whole database ?

      There are literally thousands of properties. Limiting how many properties are shown lets us make the search fast and reduces server load. You might be surprised at the number of people who try to use my search engine to get at all of the properties listed ! The choice of ten is made to fit the space and leave room to see the message that there are more. Here is an easy solution to let you see a larger group:

      1. say you have 32 results and see only the first ten, and the last one is priced at 164,900
      2. use the 'Back' button on your browser, set the lower end of your search to 164,899 and search again
      3. now you see the last two properties again (both 164,900) and a new one at that price, plus seven other new ones, the last one being priced at 172,000
      4. repeat, but setting the lower end of the search to 171,999, and so on ...
        ... or call Dot.


Questions about Buying a Home

  1. When is the right time to buy a home ?

    You may consider that researching the real estate markets and waiting for the right time to buy is the the only route to a good deal, but your personal situation is what should really determine your decision to buy. Can you pay the mortgage, utilities, taxes, insurance and any maintenance that comes up, not just this year but next year too, and the next five years ? Are you willing and able to remain in the same place for the next five years ? When you consider the closing costs involved - as a buyer or a seller - you should be prepared to keep your home for at least a few years. It's a good idea to avoid having to sell quickly, since when under pressure to sell, you are less likely to get the best price. In general, because owning is cheaper in the long term than renting, you should buy as soon as you are able to do so. However that is not just the ability to scrape together a deposit, but also includes the ability to meet all of the initial expenses as well as keep up with all of the ongoing payments and other costs. That ability is not just financial either. You must be ready to settle in your chosen area and have enough job security to feel sure you won't be forced to relocate. You also need to be sufficiently settled in your own affairs that you won't suddenly be wanting to double your space to make room for triplets, in-laws, or the nutraceuticals business you always wanted to start. If you can do it, then unless the housing market is behaving insanely, now is the time to buy.

  2. How much is required for a deposit at the time of an accepted offer ?

    You will typically be required to pay a deposit of around 5% of the purchase price of the house, and you will pay it in stages. Your first offer will normally be accompanied by a payment of about $500 to $1000 in the form of a regular or certified cheque made out to your real estate agent's brokerage. If you don't have an agent then your lawyer would hold the deposit in trust. Generally your cheque will only be deposited once the offer has been accepted. When all of the conditions on the agreement of purchase and sale have been settled then you would increase the deposit, generally to around 5%, though it is a negotiated amount. You would typically pay the increase in deposit using a bank draft or certified cheque, and it would also be held in your real estate agent's trust account along with the initial deposit. The deposit forms part of the down payment, and the balance of the down payment would be paid on the closing (completion) date. Usually a bank draft or certified cheque made out to your lawyer would be the most common way to pay the balance of the down payment. Your lawyer should advise you of the exact amount and method of payment.

  3. Should I make an offer subject to a Home Inspection ?

    Yes. Absolutely yes. There are multitudes of dreadful horror stories arising from failure to have an inspection. Often a lender will require an inspection as a condition of granting you a mortgage, and this may be your main motivation. Even if your surname is "Gazillionaire" and you have the cash right there in your pocket, make the offer subject to inspection. Be sure your offer is subject to a professional inspection. Even if the home is new have a pre-completion deficiency inspection as a condition. You can write into your contract that you will have a professional building inspector accompany you for the deficiency inspection. It cannot be said too often that you should make your offer subject to inspection. Do it.
    OK, now you know how I feel about it, here is why. When you walk through a home you are thinking of buying it is hard to be unemotional and really see what condition it is in. You certainly are not likely to climb onto the roof or crawl under the foundation to check things out thoroughly. Most of us lack the training to discover major structural flaws or impending maintenance problems even if we did so. A professional home inspection before you buy provides you with the security of knowing what to expect and helps you make an informed decision about the real value and future costs of your intended purchase. Any major problems which come up can be brought to the sellers attention before you are fully committed, and a professional report can give you leverage in negotiating the eventual outcome. Be sure to add a "subject to inspection" clause to your contract and get the peace of mind and protection offered by proper inspection.

  4. What is included in a Home Inspection ?

    A home inspection is not an appraisal or an evaluation of the purchase price. It is not an inspectors job to keep current with property values. What an inspector does is thoroughly examine the property from top to bottom, including heating and air conditioning, plumbing and electical systems, roof, walls, ceilings, floor, windows, doors, insulation, foundation and basement. Older homes will be examined for led paint, asbestos, UFFI and aluminum wiring. Even termites where necessary. You may also want to ask for a check on radon gas.
    A home inspection will take about three hours, and joining the inspector for the process should be worthwhile. You will have a chance to see problems firsthand, learn in detail about your new home, and get maintenance advice. Regardless of whether you attend the inspection you will get a written summary of what was done along with a list of defects, and cost estimates for getting them fixed. Just because a home is new does not mean it is flawless. For a new home, the builders insurance does cover the cost of fixing defects, but the nuisance and disruption can be avoided by getting them seen to before you move in, which is the main point of having an inspection.

  5. What services does a real estate lawyer provide ?

    You will definitely need a lawyer or notary public to "close" your transaction (handle the final mortgage paperwork and the land transfer). Though the rest could be a DIY project, it is quite a bit of work for anyone lacking experience, and the consequences of it being done wrong may not bear thinking about. This is what your lawyer should be handling on your behalf:

    • Title Search: checking that the people selling the home really do own it, and that any claims against the property are cleared before you take it on.
    • Conveyancing: preparing and reviewing all the paperwork you need to transfer ownership, and ensuring you get a valid title (the deed).
    • Title Insurance: gets insurance to protect you (and your lender) in case of problems with the title or the zoning.
    • Survey Review: checks that the survey is accurate and valid.
    • Tax Investigation: checks on taxes owing to make sure all tax commitments are met before you take over the title.
    • Land Transfer Tax: calculates the land transfer tax, collects it from you and pays it for you.
    • Fees Payable to Seller: calculates any adjustments you may owe the seller for prepaid taxes, utilities or other service fees.
    • Mortgage Paperwork: draws up the mortgage documentation (in rare cases the bank wants their own lawyer to do this).
    • Builder Commitments: for a new home, checks the specifications and contractual obligations of the builder to ensure you get everything you are entitled to.
    • Inspection Review: for a new home, checks for a complete inspection and ensures you have an occupancy permit (makes sure the municipality agrees the work is done and the place is fit to live in).

    Remember that your "Agreement of Purchase and Sale" is a binding contract. Much of the content is boiler-plate these days, and a good buyer's agent can generally be trusted to look after your interests properly. If you have any concerns about this then ask for insertion of a clause making it subject to legal review. A private seller's or builder's agreement may be non-standard and favour the vendor, so definitely insert such a clause if you are acting without an agent, or if you are buying a new home.

  6. How can I know whether the asking price is fair or not ?

    One basis for appraising the value of a home is a CMA (Current market Analysis). Your realtor should prepare a CMA before you make your offer, to guide you in deciding the fair market value of the home. A CMA references other similar homes in the same or similar neighbourhood. It will tell you what is currently being asked for comparable properties. It will tell you what similar properties recently were sold for, which tells you what other buyers are willing to pay. It will also give you information on expired listings, which tells you what other buyers are not willing to pay. Based on this information along with other relevant factors, your agent will help you decide what to offer. If you are still in doubt then an appraisal by an AACI or CRA designated independent appraiser may be in order. An appraisal is likely to cost in the $200 to $500 range, but you may be able to work out an arrangement with your mortgage lender to share the cost. An appraisal will help to deal with situations where recent sales of comparable homes are few or unavailable, perhaps because the area population density is low, the home is unusual or has unusual features, or the market has changed radically in a relatively short time period.

  7. Do first time buyers have any advantages ?

    Certainly. First time buyers have no encumbrances. They have no property to sell before they can close their purchase. They are seldom under pressure to get a home quickly, and can take their time if necessary. A pre-approved buyer is almost the equivalent of a cash purchaser. If your vendor is under pressure to sell by, or not before, a certain date then you can probably accomodate that schedule while many other prospective purchases could not. This could make your offer more attractive and competitive even if it is on the low side of the vendor's expectations.
    Besides this, you can also take advantage of the Federal Home Buyer's Plan (also available if you haven't owned a home in the previous five years). This plan will permit you to borrow up to $20,000 per person from your RRSP, without penalty, to use as a down payment. The money must have been in your plan for at least 90 days, and you will have to pay back at least 1/15th every year for 15 years after the second year, or face paying income tax on it. Your RRSP contributions can therefore give you tax relief and at the same time provide you with an asset pool to use as a down payment, or a means to reduce your interest burden.

  8. Is it to my advantage to have a buyer's agent or should I deal directly to the listing agent of a property ?

    Agents are looking at homes every day, and they have years of experience at it. Your agent will know about a property before it gets on the publicly available listings, and sometimes even before it is officially listed for sale. If your requirements are very specific as to location, your agent may be able to canvass owners by telephone or mail to see who may be planning to move, and find you a property even before it reaches the market.
    To fully appreciate the importance of having your own agent, you should examine our page explaining agency. In short, even though your buying agent's commission is paid out of the seller's proceeds from the sale, her legal and ethical duties are to you. She must keep all your personal information and confidences just that - confidential. She must tell you anything she knows which might help your negotiations. If she finds out that the seller is being relocated, or is going through a divorce, and is under pressure to sell quickly, she must tell you. The same if someone lets slip to her that the seller will accept a lower price. In addition your buyer's agent will help you determine how fair the asking price is, will prepare your offer, and will negotiate on your behalf (but with your approval all along the way) to get the best price and conditions possible for you.

  9. What happens to my deposit if the deal falls through ?

    The short answer is, 'It depends, and you should ask your lawyer.' But you aren't asking your lawyer, you are asking me, so I'll try to give you some general background and examples. Bear in mind that every situation varies, and there are other points of view besides your own, so consulting your lawyer would be wise.

    Most often the deal fails to close because one of the offer conditions is not met, and for good reason. For example, the offer may have been conditional on the buyer being able to obtain a mortgage, and everyone expected there would be no problem. However, it turns out in the course of processing the mortgage application that the buyer is not actually able to obtain a mortgage for the expected amount, and is unable to find additional down payment to make up the difference. In such a case, the offer will normally have had a clause in it saying, 'unless the buyer gives notice in writing to the seller by such-a-time-and-date that this condition has been fulfilled, this offer shall become null and void and the deposit shall be returned to the buyer in full without deduction.' Normally the buyer and seller will not wait for the expiry of the condition, but as soon as the problem comes to light and proves unsolvable, both parties will want the offer terminated. The buyer wants her money back, and the seller wants his house back on the market. The buyer's realtor would then draw up a 'mutual release', which the buyer will sign and send to the seller's realtor who will get the seller's signature. On the strength of this document, the deposit, which was in a trust account held by the seller's real estate brokerage, will be returned to the buyer. It takes several days for the cheque to be made out and forwarded to the buyer.

    Problems can sometimes occur. The seller may not wish to sign the mutual release. Perhaps the seller is upset because he thinks it was the buyer's fault that the deal has fallen through. For example, the deal was subject to a home inspection and also to the sale of the buyer's own property, but the buyer's property has been on the market a long time and not sold. The seller does not want to extend the completion date, so at the last minute the buyer decides to refuse to close on the basis that the home inspection was not satisfactory, but the seller knows that no home inspection took place. In the absence of a mutual release (which is only mutual if both parties sign), the seller's brokerage cannot release money from their trust account. The buyer can't get it back, but the seller can't have it either, so it is just an angry seller's way of punishing the reluctant buyer. However, the seller could proceed with a legal claim in an effort to obtain the deposit in compensation for losses arising from the failed deal. If the buyer was clearly at fault and actual losses could be proven, then such a claim might succeed.

    What if it is the seller's fault that the deal has failed. Maybe the offer was subject to a condition which the seller did not fulfil. Perhaps the property burned down, so the seller can no longer provide what the buyer agreed to purchase. In such a case, the buyer's legal claim on the deposit money should be quite clear. A seller would have to buck the advice of his lawyer and realtor in a pointless attempt to frustrate the buyer's fairly obvious right to the return of his deposit. Only a very unreasonable seller would refuse to sign a mutual release in such circumstances.

    Use care. If you, as a buyer, unreasonably cause a deal to fail, then it may not only be your deposit that is at risk. If the seller has suffered a loss in excess of the deposit money as a consequence, then your liability may not be limited to just the deposit. The seller may be obliged by constraints of time or market conditions to accept another and lower offer, and you could be on the hook for the difference. There may be a chain of deals involved, and financial consequences suffered by third parties may visit you in the form of a civil suit to recover their losses. Regardless, if you end up in court over issues to do with your behaviour regarding the offer, legal defense can be expensive. Be sure to conduct yourself with integrity and act in good faith within the terms of your offer. If you do so, the risk to your deposit should be slight.

    If you are thinking about backing out of a deal, see your lawyer first.

    Important addendum relating to FSBO (for sale by owner) agreements:
    If you have entered into an agreement independently of a Realtor, then there may be additional risks to your deposit. When no real estate brokerage is involved in the transaction then you may have ended up placing your deposit in the hands of someone who does not have a trust account or who is not regulated or insured to the same extent as a real estate brokerage. In such a case your rights and avenues of redress could be seriously curtailed, and much of the foregoing will probably not apply. Your deposit holder may not have a neutral attitude in the transaction. It may even be that your deposit has already ended in the hands of the seller, and you are effectively at the seller's mercy. Remember that the seller's lawyer is generally bound to act on the instructions of and in the interests of the seller.

    Even with a Realtor, this sort of thing could happen, since a non-standard clause may have been used at the seller's insistence, but in such a case your Realtor would have had an obligation to clearly explain the risks and potential consequences. A failure to do so might leave you an opportunity to recover losses from your Realtor.

    If you have a non-OREA form or a non-standard deposit holder clause, definitely consult your lawyer!

  10. How do I go about buying a home with someone else ?

    There are very few problems involved in this process, and a minimum of decisions to make. However those decisions are not as simple as you may think, so it would be wise to consult a lawyer. Here is a simplified version to give you the basics.

    The paperwork should be made out in the names of all of the purchasers. If a husband and wife wish to purchase the home together, then both of their names should go on the offer and all supporting documents. It should not say "John and Dot Turner", but should say instead, "John Turner and Dorothy Turner". Common law partners would handle the matter no differently. A bunch of friends buying a holiday property to share would do the paperwork similarly. In some situations it might be wise to form a corporation to execute the purchase so that shares in the property could be transferred without the need to engage in land transfers. In such a case the corporation would be named as the purchaser, and the paperwork would be signed by an officer of the corporation who has authority to legally bind the corporation.

    First of all, you should decide on tenancy. Do you want to be joint tenants, or tenants in common ? Joint tenancy means that the survivor automatically inherits the property. Joint tenancy must stem from the same legal instrument. The interest of each joint tenant must begin at the same time and be identical in nature, extent and duration. All joint tenants must have an identical interest in all of the property and an exclusive interest in none of it. That means each joint tenant owns the whole property and has complete authority over all of the property. The property can only be sold by all of the joint tenants acting together. Joint tenants should be married or at least very good friends with a history of mutual trust and compatibility.

    Tenants in common have defined shares which need not necessarily be equal. They also have no right of survivorship. However they do all have rights over the whole property and use of the whole property. The individual shares therefore mainly define how the value represented by the property was financed and how it will be divided when eventually sold. Each of the divided shares can be individually sold and bought, and ownership passes on death to the individual's estate, so it can be willed. If a tenancy does not satisfy all of the conditions of joint tenancy then it is automatically a tenancy in common.

    If you form a corporation to own the property, then you may have greater flexibility in defining the rights of individual shareholders through the classes and amounts of shares held by each. Those rights and values may be readily altered through the purchase and sale of shares, making ownership more fluid without the complexities of registering changes in title. There may be legal implications involved depending upon the jurisdiction in which the property is located. A lawyer should definitely be consulted if you intend to use a corporation as a vehicle for owning real estate.

    Once you know how you wish to own the property, either as joint tenants or tenants in common, you can arrange your financing. Joint tenants can approach a mortgage broker or lender together to have their purchase financed out of their joint incomes. Tenants in common might also do so, but could also approach a variety of lenders to finance their individual shares in the property, since each is individually negotiable. You will also be able to clearly instruct your lawyer as to how you wish to register the title to the property. Prospective tenants in common and unmarried prospective joint tenants would be wisest to consult a lawyer before entering into an offer, to clarify their options and choose the most appropriate means of ownership.


Questions about Mortgages

  1. Are there advantages to getting pre-approved for a mortgage ?

    There certainly are. It is free, and by getting pre-approved, you know your financial capabilities before you enter into an offer situation.

    • You know your price limit.
    • Your offer will be taken more seriously than one from a buyer who is not pre-approved.
    • You are protected for a stated period against any rise in interest rates.

    Just because you are pre-approved does not mean you can make an unconditional offer to purchase. You still have to get the actual mortgage, which is subject to a full check on your finances and a property appraisal. It may also be subject to CMHC approval if your mortgage is high-ratio (less than 25% down payment). These things will not be settled until after you have an accepted offer, so be sure to include "subject to financing" as a condition. However, you and your buyer both know that you have the financial clout to make the deal go through, provided you told all the truth on your initial application, and the property is worthy of the loan involved.

  2. What is the difference between a conventional mortgage and a high-ratio mortgage ?

    A conventional mortgage is for no more than 75% of the purchase price or the appraised value, whichever is the lower. Conversely, a high-ratio mortage is for more than 75%, and up to 95% of the lesser of the purchase price or the appraised value.

  3. How much will high-ratio insurance cost ?

    A high ratio mortgage must be insured to protect the lender against default in payment. The insurance premium will be on a sliding scale from about 0.5% to around 3.75% of the mortgage amount, depending upon the degree of risk involved. You will be expected to pay this insurance for your lender, and its cost will be added to your mortgage payments.

  4. What strategies can we use to keep our interest payments low ?

    • Make the biggest down payment you can reasonably afford. THis will result in a smaller loan and less interest. If your down payment is at least 25% they you could avoid high-ratio mortgage insurance fees.
    • Make weekly or bi-weekly payments to reduce the principal faster and so pay less interest on it. See our mortgage calculator page for links to more information and an example calculator provided by TD Canada Trust.
    • Choose the shortest amortisation period you can afford, since the longer the term for which you borrow, the more interest you will pay.
    • Make extra payments whenever you can, taking care to avoid any penalties your lender may impose. Bonus pay, inheritance, lottery win or whatever, should immediately go to pay down some principal.

  5. Is there an advantage to using the services of a Mortgage Broker ?

    Mortgage brokers are not affiliated with any particular lending institution. Your mortgage broker will endeavour to match you with a lender who gives the best terms and rates for your situation. Besides the usual bank lenders, your mortgage broker will have access to trust companies, pension funds, private lenders, real estate syndicates and foreign banks. Typically the lender will pay the mortgage broker a finder's fee based on a percentage of your mortgage. Only if your credit history is particularly bad would you be asked to pay the fee to the broker, or repay it to the lender.

  6. What information will a lender want from me ?

    To ensure that you are able to sustain long term mortgage payments on the property of your choice, and not default or otherwise cause trouble to the lender, you will be asked a variety of personal questions about your finances, employment and persoanl history. For example:

    • Your age, marital status, dependents, place of employment, job, length of service, employment history. A letter from your employer might be required to confirm your status and income. Self-employed persons could provide at least two years of tax assessments or audited accounts.
    • Your gross family income, proven by T-4 slips or income tax returns. Any claims for additional income sources will also require evidence to back them.
    • Your current expenditure on housing, with rent, lease or mortgage agreeements as evidence.
    • Your down payment amount and source. The down payment must not be from another loan, and you may be required to prove this from bank deposit records, or evidence that you received it as a gift or from some other source.
    • A list of your assets (eg. car, vacation property, boat, investments) and their value.
    • A list of your liabilities (eg. credit cards, student loan, car loan, mortgage) with their amounts.

    Your lender will do a credit check, and ask for your written permission to do so. It is a useful idea to be prepared, by asking a credit-reporting agency (like Equifax) to provide a copy of your credit report. If you find any inaccuracies or outdated information then you can ask to have it corrected before your lender gets to see it.

  7. What questions should I ask a lender ?

    • Will all my information be kept confidential ?
    • What mortgage types and terms do you offer ? Which are particularly suited to my situation ?
    • What are your current rates ? Compare the rates for open and closed mortgages, and compare with the rates offeres by other lenders
    • How do you make your rates competitive with those of other institutions ? Do you offer discounts or cash-back options ? Some lenders will reduce their rates when asked, to compete with another offer you can document. Others might provide a percentage off the mortgage up front (a cash-back) to help with closing costs.
    • What fees are involved ? Is there a mortgage application fee ?
    • Do you pre-approve mortgages ? Is there a fee for this ? (Most lenders do not charge a fee.)
    • How long will it take to process my application ? Once you approve it, how long should I allow for the deal to close ? The timing for getting you mortgage approved and the funds transferred is crucial to closing the deal. You should know enough to be able to plan your offer properly from the start and avoid embarassment.
    • How is the interest compounded ? Usually semi-annually, but there may be other options which could save you money.
    • Can I convert from variable to fixed rate ? If you choose a variable rate mortgage to start with then you may want to convert to fixed rate to lock in a lower rate or protect yourself against rising rates. It is good to know in advance whether you have this option.
    • What are my paymnet options ? More frequent payments can save you money. Go for weekly if it is offered.
    • Can I pay it off early ? Is there a penalty ? Can I pay down any of the principal without penalty ? How much per year ? The option to use bonuses or tax rebates to pay down your mortgage can save you large amounts of interest.
    • Do you offer mortgage life insurance ? Will it cover my spouse as well ? How much will it cost ? A separate insurer may offer the same cover at lower cost.
    • If your credit rating is not acceptable, ask what you can do to improve it, or what other options are open to you.

  8. What paperwork will a lender require once my offer to purchase a home has been accepted ?

    You may have obtained your pre-approval with little or no paperwork on the strength that your assertions were true, but when the time comes to make that promised financing real, you will be expected to back up your statements with hard evidence. Before you get the money, your lender will want to see:

    • Copy of a recent appraisal for the home you intend to buy (unless your lender obtained this for you)
    • Copy of the property listing
    • Copy of the agreement of purchase and sale (new or resale home) OR
    • Plans and cost estimates (for a construction loan)
    • Survey certificate
    • Condominium financial statements (if applicable)
    • Well water and septic system certificate (if applicable)

  9. How much can I afford ?

    Check out our mortgage calculators. There are really two questions here:

    1. What will a lender provide given my present financial situation ?
    2. What size of loan do I feel comfortable supporting ?

    The first question is answered on the basis of an established formula involving your cash flow, and to answer it see our income-based calculator. The second question is more personal, but using our mortgage calculator you can determine principal from payment or payment from principal as you prefer, given your choice of term and interest rate. Once you actually have a home under consideration and you know the amount of the loan involved, you might want to look into your repayment options using the link to the TD Canada Trust calculator which will let you see the effect of changing the way you handle your payments.
    When trying to determine how much you can afford, use a little caution. Remember you will have to pay for taxes, utilities, maintenance, property improvements and a host of other things (mower, gardening tools, lawn care, pool chemicals, fertilizers ...) you may not have had at your former location. It is no good getting the property of your dreams to end up losing it because you cannot keep up the payments, hating it because you can no longer afford a vacation from it, or having it get run down because you cannot afford to maintain it.

  10. How can I achieve mortgage freedom sooner ?

    The easy way is to simply increase the frequency of your payments. If you just pay every two weeks instead of monthly, your 25 year mortgage can be reduced to 20 years. For example, on a $100,000 loan at 10% amortised over 25 years:
    Payment PatternAmountInterestSavingsTerm
    12 Monthly$895.00$168,500None25 yr
    26 Bi-weekly$447.50$118,927$49,57318 yr 10 mo
    52 Weekly$223.75$118,111$50,38918 yr 9 mo


Questions about Realtors

  1. What services can I expect from a realtor ?

    A realtor's business is real estate, so you can expect your realtor to have a good grasp of market values, what is available in your price range, and what homes will meet your particular needs. A realtor can tell you about financing and property taxes, neighbourhood history and character, and information about schools, services, shopping and churches. A realtor has advance information about properties coming onto the market and recent price reductions. A realtor will:

    • Review your requirements and help you determine your price range
    • Answer your questions about the market
    • Help you compare homes between neighbourhoods
    • Provide you with information on a broad range of homes through the MLS
    • Help you evaluate which possible homes would most likely be of interest to you
    • Make appointments and show you these homes
    • Help you negotiate the best deal, heading off potential conflicts and mediating
    • Explain financing alternatives, and give you up to date information on rates and options
    • Put you in contact with reliable people (mortgage brokers, inspectors, lawyers) to help you carry through your transaction

  2. Is it to my advantage to have a buyer's agent or should I deal directly to the listing agent of a property ?

    A buyer's agent is better. The listing agent is the vendor's agent and obligated to the vendor, not to you. You can enter into a dual agency agreement with the vendor's agent subject to the willingness of the vendor. Remember that in the absence of any such formal agreement the vendor's agent is not your agent. He can, should and will tell the vendor everything he can find out about you and your situation. You will be up against a highly skilled and motivated team and could easily lose the edge as a result. Having a buyer's agent provides you with a skilled negotiator on your side. Your buyer's agent can help you objectively evaluate the property, to come in with the right offer price and terms. In all probability her knowledge and skill will save you a good deal of money in the negotiation process.


Questions about Selling a Home

  1. Do I need a realtor, or should I sell my home myself ?

    If your timing is right, you are not under pressure to sell, you are a skilled negotiator, and you have plenty of time to spare, then the FSBO route might well be right for you. Otherwise think again. See our FSBO page to help you with this evaluation. A FSBO seller sometimes can get more for a home, just like some people can win the lottery. As with lotteries the winners' stories encourage others to participate, but the majority lose. By the same token many FSBO homes end up netting less than they would have if sold through an agent in the first place, even if in the end they are sold by an agent. Why ?

    • Advertising costs quite a bit, cheap advertising is almost worthless
    • Advertising coverage is significantly less
    • Most FSBO homes are priced wrong to start with
    • FSBO homes attract buyers looking to get a bargain, who will put in low offers
    • Discouraged FSBO sellers end up running out of time then rush to sell too low, or get an agent in and sell at a decent price but never get their (sometimes considerable) advertising costs back

    Besides all this, much time is wasted by enquirers who are not serious. Having an agent in place tends to filter out unmotivated buyers, and those who or are likely to make ridiculous offers.

  2. How can I know what the right asking price is for my property ?

    You probably already have some notion of what you want to get for your home. The question is whether this is unrealistically high, or too low. The disadvantage of a low price is obvious. Too high a price can leave your home ignored by many potential buyers, and eventually sold at the low end of its potential because successive price reductions attract little interest. It is important to price competitively - which does not mean listing with the agent who says he can get you the most. Choose your agent first, as the person whom you believe will provide you with the best service. Then ask your agent to help you set the right price for your home.
    The most common basis for setting the value of a home is a CMA (Current market Analysis). Your realtor should prepare a CMA to guide you in deciding the fair market value of your home before you sell it. A CMA references other similar homes in the same or similar neighbourhood. It will tell you what is currently being asked for comparable properties. It will tell you what similar properties recently were sold for, which tells you what buyers are willing to pay. It will also give you information on expired listings, which tells you what buyers are not willing to pay. Based on this information along with other relevant factors, your agent will help you decide how to price your listing. If you are still in doubt then an appraisal by an AACI or CRA designated independent appraiser may be in order.
    If you are not convinced that Dot has given you the right advice for pricing your home, then she will bring in a certified appraiser to advise you at no added cost, provided you do end up listing your home with her at the price you consider right.


Questions about Taxes and other Costs

  1. What kind of costs does a new homeowner face ?

    • Maintenance for repairs, improvements and emergencies.
    • Insurance is required (fire and extended cover) before your loan will be granted since the home is the only security for the loan. In addition consider your own need for contents insurance, public liability, and living allowance (in case you are forced out of your home while the insurance pays for fixing it).
    • Utilities have to be paid for heating and cooling your home, water supply, sewage. Newer homes are likely to cost less for heating and cooling if they have better insulation. Different forms of heating (gas, electric, oil) have different costs associated.
    • Taxes vary in proportion to the assessed value of your home and will generally be more for a more expensive home. They also vary from area to area and go up (never down!) year by year.
    • Condo fees take care of the maintenance for you, but watch out for them because they could amount to as much as a small rent!

  2. What closing costs can we expect to pay ?

    You will have to meet your deposit and downpayment fees, but they are part of the agreed sale price in the offer, not extras like:

    1. Financing fees charged by the mortgage broker are usually paid by the lender, but if you have a poor credit history then you may be asked to pay these, which may be up to 2% of the total loan. Most lenders will charge an application fee when you apply for a mortgage, but the fee is often waived if you ask.
    2. Insurance fees will be charged for a high-ratio mortgage and added to your payment schedule. This insurance can cost between 0.5% and 3.75% of the total loan and may be taxable (GST and/or PST, or HST).
    3. Legal fees pay the lawyer or notary public for the work involved in making sure you get a clean title. The lawyer will also charge you for disbursements which are paid on your behalf and constitute the various fees and expenses incurred by the lawyer. Besides land transfer and other taxes listed elsewhere there are the monies you have to repay the present owner for things he has paid in advance like property taxes, condo fees and prepaid utilities. You will only be paying the pro-rata portion applicable from when you take over ownership, but it all adds up.
    4. Appraisal will be required by your lender to confirm the property is at least worth the loan, and one way or another you will pay (the $150-$250) for it.
    5. Survey verifies the boundaries of your property and is likely to be required by your lender, or by the Land Titles Office. Its cost varies widely by region and type of property.
    6. Inspection of the property is a professional report on its condition, and though not an absolute necessity in all cases, it is a foolish economy to omit this comparatively minor ($150-$500) expenditure. In rural areas part of the process will be to certify the wells and septic system are in good order, and this is an extra $50-$100 cost.
    7. Condominium certificate is a document confirming the seller has met all his obligations. It goes under a variety of names including estoppel, status, and information certificate, and usually costs about $50.
    8. Property tax will be cahrged as one of your lawyers disbursements, for the prepaid portion applicable from when you acquire ownership.
    9. Land transfer tax varies across Canada (applicable in BC, MB, ON, PQ, NB, NS) from 1% to 4% of the purchase price, and is waived, in part or whole, for first-time buyers in some provinces.
    10. GST or HST is due on new homes and ones which have been substantially renovated. You will also owe GST or HST on all the services - your lawyer, inspector, appraiser, etc.
    11. Extra fees can be incurred for garbage and recycling tags, dyking fees, meter hookups, tree planting, education development, etc - almost anything goes and it will vary locally because these are all local quirks.
    12. Moving costs should not surprise you, so don't forget about them.
    13. Utilities often charge hookup fees for phone, cable, hydro, etc, and you will need to pay the post office to redirect your mail.

  3. How can we calculate the land transfer tax we will have to pay ?

    Land transfer tax varies across Canada by province. It is charged in BC, MB, ON, PQ, NB, and NS. It varies by province from 1% to 4% of the purchase price. It may be waived, in part or whole, for first-time buyers in some provinces. Ask your agent, lawyer or bank to get the latest and most up to date information. If you are buying a residential property in Ontario then you can use this calculator:

    Enter the Purchase Price of the Property (numbers only: no $, commas or periods)
      Land Transfer Tax Payable

    Rates are effective January 2002 - Residential Property Purchase: 0.5% first 55,000, 1% to 250,000, 1.5% to 400,000, then 2%

  4. Will we have to pay GST or HST on a home purchase ?

    If the home is new construction, or if it has been substantially renovated, then yes, you will have to pay these taxes on the price of your home. The Ontario government is providing some relief from the PST portion of HST to facilitate the phasing in of the change from GST to HST. This relief applies to lower priced property (under $400,000) with partial relief for properties in the $400,000 to $500,000 range, with no relief for properties priced over $500,000. No rebates apply when the home is to be occupied by the builder, or if it is a mobile home. There are transitional rebates in effect to ameliorate double taxation based on the proportion of the work carried out before/after the introduction of HST.

    GST or HST will be charged on all the services you engage (lawyer, inspector, appraiser and so on).

  5. How much will high-ratio insurance cost ?

    High-ratio mortgage insurance is charged on mortgages which exceed 75% of the lower of the purchase price or the appraised value. The insurance is added to your mortgage payments and varies from 0.5% to 3.75% of the total loan amount, on a sliding scale determined by risk. You may have to pay GST and/or PST on this insurance - the rules vary by province.


Questions about Real Estate Terminology

  1. Explain the various types of mortgages.

    Conventional Mortgage
    is for an amount not exceeding 75% of the lesser of the purchase price or the appraised value of the property. That means your down payment must be at least 25% of the purchase price.
    High-ratio Mortgage
    is for more than 75% of the lesser of the purchase price or the appraised value of the property. Your down payment may be as little as 5% of the purchase price for a high-ratio mortgage. A high-ratio mortgage requires mortgage loan insurance, which the CMHC offers for between 0.5% and 3.75% of the mortgage amount. There may be additional charges, so take care ! The premium can be added to the mortgage payments if it is not paid in full at closing.
    Second Mortgage
    is taken out after your first mortgage. Because in the event of default the loan principal for a second mortgage can only be recovered after obligations to prior lenders have been met, it entails a higher risk to the lender. It therefore usually has a higher interest rate and shorter amortisation than a first mortgage. A second mortgage is often used for renovations.
    Beware
    Some very creative lending is being done by the institutions. Be careful about what you are getting into. Read the agreements before signing. Ask questions and get answers you understand. Some of these contracts will effectively lock you in to a single supplier for all your debt, and will tie the debt to the equity in your property. This can have serious consequences when it comes to renewing your mortgage as it may become impractical or even impossible to shop around for better rates. Depreciating asset or credit card debt may end up secured as a part of a floating first charge on your home. Another lender may be unwilling to accept the risk involved in assuming the card debt or in taking a second mortgage position behind a floating sum for funding your major debt.

  2. What is the difference between an open mortgage and a closed mortgage ?

    Open Mortgage
    can be repaid any time in part or in full without penalty. An open mortgage usually has a higher interest rate.
    Closed Mortgage
    usually offers the lowest interest rate available, but is not flexible. Often restrictions and penalties are attached to prepayments or lump sum payments which would reduce the amount of interest payable. If you are on a budget and would like the guarantee of a fixed rate for a few years then it can be a good idea. If you think you will want to move before the end of the term, then it may not be such a good idea, unless it is assumable (your buyer can take over where you leave off) or transferable (you can carry it over to your next home).

  3. What is meant by fixtures excluded ?

    Fixtures
    are permanent improvements that normally go with the property as a part of the sale. Sometime it is not entirely clear what is a fixture. The swimming pool probably is, but the heirloom chandelier in the dining room might not be. In such a case the chandelier would be listed as a "fixture excluded", meaning it would normally be considered a fixture, but in this case as an exception it is not included in the sale.

  4. What is meant by chattels included ?

    Chattels
    are items not normally considered part of the home. As an attraction to the buyer, some of these moveable items of personal property, such as washer, dryer, stove, refrigerator or window dressings, may be listed as "chattels included". That is to say, as an exception these items will be sold with the property even though they are not a part of the property.

  5. What is the irrevocability period in an offer ?

    Irrevocable Period
    is the time during which your offer is open for consideration. If your offer is not accepted by the exact time and date stated then it becomes null and void. Prior to that time, if your offer is accepted, then you are legally bound by it. Your realtor will help you set a reasonable period for letting the other party think about your offer. It will vary with the circumstances, but is usually less than 48 hours.

 

Site owner: Dot Turner, Sales Representative, Team Realty K W Inc, Brokerage 519-741-1400

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