Setting a budget
How much home can I afford should be the first thing you consider when planning to start your home search. The first step to answering the question is to get a pre-approval from your bank or mortgage broker. Pre-approval for a mortgage is critical because nothing can happen until you are certain that you have the funds available to purchase a home.
Part of our service is to guide you through the process and recommend some top mortgage professionals from both the major banks and brokers and it’s always a good idea to consider your options. Getting a pre-approval for your mortgage is very simple and will give you the confidence to pursue your search, knowing that you can confidently answer the question of how much home I can afford.
Typical home buying costs
When buying a home, there are out of pocket expenses that you will have to have the money for that are above and beyond the mortgage costs. Lawyer fees, land transfer tax and home inspections are just a few examples. It is recommended that home buyers plan for between 1.5 to 2% of the purchase price to cover closing costs.
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Typical Home Buying Costs
The down payment is the part of the home price that is not included in your mortgage. Currently in Canada, you need minimum of 5% down payment to buy a home with mortgage insurance, and 20% down for a conventional mortgage. It is common for first time home buyers to purchase with 5% down. For example, if you were to buy a $400,000 house with 5% down, you would be able to borrow $380,000 on your mortgage (95%) and you would be responsible for paying $20,000 on closing.
A deposit is the amount of money you pay when you have an accepted offer to purchase, to show that you are a serious buyer. The good news is that the deposit forms part of your down payment with the rest due on closing date. Using the previous example, if you put down a $10,000 deposit on a house priced at $400,000, that deposit would form part of the down payment so you would only owe $10,000 at closing if you are buying with 5% down.
There is no standard rule on how much a deposit should be, however there are market ‘norms’ for the area and style of home you are purchasing that your realtor can explain. Keep in mind that a deposit can go a long way to showing how serious of a buyer you are. I have personally witnessed buyers loose out on a great home simply because the deposit they offered was too low for the sellers.
Deposits are normally held in trust by the listing brokerage and they are insured against loss in Ontario so they are protected. Keep in mind that if for some reason you back out of the deal after all conditions have been waived and it is a firm and binding deal, you may loose your deposit on top of being liable for legal damages. Having proper representation and understanding the process is critical to ensuring that you have a good home buying experience.
In Ontario, it is ‘Buyer Beware’ when purchasing a home. That is why it is usually recommended that you include a condition on home inspection in your offer to purchase. The home inspection protects the buyer by giving them the chance to have the property inspected to ensure there are no hidden surprises that the buyer was unaware of. The typical cost of a professional home inspection is between $400-$600 depending on the size of the home and the expertise of the inspector. Prices to vary so feel free to call around before placing an offer to get quotes.
Land Transfer Tax
In Ontario the home buyer is responsible for paying taxes on the land transfer. The tax is progressive, meaning on the first $50,000 you pay 0.5% and then from 50-250,000 you pay 1% on that money. For example on a $400,000 home you will pay $4475 in Land Transfer tax. However, the good news is that if you are a first time homebuyer you qualify for a rebate on the first 200k so that means you will pay only $2475.
Note that if you are purchasing in the City of Toronto, you are responsible for both the Provincial land Transfer tax and the Toronto land Transfer Tax. So using the same example, the total tax on the same $400,000 house purchased in Toronto would be $8200. The City of Toronto also offers a rebate for first time home buyers.
The easiest way to calculate the land transfer tax is to use my calculator below. It’s self explanatory but enter the purchase price, select Ontario or Ontario (Toronto) and it will calculate the taxes owing.
Land Transfer Tax Calculator
A Lawyer acts for you when transferring title and arranging the mortgage. They are the guarantor, they legally make sure all money is properly transferred and such. They also take care of title insurance and other disbursements. There is no set fee for legal services, however a good rule of thumb is to estimate $1500-1600 for the cost of legal feels (including title insurance). Feel free to contact a number of lawyers before placing an offer to get quotes.
Typical Home Buying Costs Summary
The costs above are the typical costs associated with buying a typical home in Mississauga, Oakville or the GTA. In certain cases there can be additional upfront costs that can be negotiated between buyer and seller or with your service provider such as:
• Mortgage Appraisal Fee
• Land Survey
• Water and Septic Tank Inspections (rural properties)
• Status Certificate (Condo)
• Mortgage Lender Fee
Your realtor will be able to go over these additional costs and help you determine if they apply to your situation.
There you have it, a list of the Typical Home Buying Costs explained. I hope you found this article informative. If you are considering buying a home in Burlington, Oakville, Hamilton or Milton and would like to receive more information about the home buying process feel free to contact me or fill out the form at the bottom of the page.
The Home Buyer Consultation
Consultations are commonplace in many industries for one reason: when you hire someone to work with you, it is essential that you all get along, communicate well with each other, and are able to clearly share your thoughts, ideas, needs and wants. For example, you would never hire a contractor to renovate your home or a designer to plan your kitchen without meeting them first and feeling very confident that they know exactly what you’re looking for.
Home Buyer Consultations are not commonplace in the real estate industry. Let’s be clear as well, it’s not an awkward meeting where we force a contractual obligation on you. And it’s not a back and forth over email. Its a meeting for us to get to know each other better and to determine if we want to work together moving forward. You can’t really get a sense about someone until you meet them in person, so a consultation is essential to building the proper working relationship.
Click on link below for what to expect during home buying consultationRead More...
What will the Home Buying Consultation Cover?
1. How I work with Clients. I work on a foundation of open communication & feedback. The most rewarding and critical aspect of working with buyers is to learn who you are beyond the wish list; to get to know your personality and how you tick. Whether you are introverted, extroverted, patient, short-tempered, impulsive or pensive, this all impacts how to best communicate with you and how we can create a successful experience for you. We ask a lot of questions as we view homes because we need to have open dialogue and build trust. You can’t hurt our feelings and your feedback is what enables us to filter your options and determine which of your priorities rise to the top.
2. What Kind of Buyer Are You? This is where we talk about your goals, needs and wants. Some people are very focused and don’t waiver. Some people change their minds a lot. Some people are buying for long term gain and some care more about a pretty home with immediate gratification. Some want a home that will suit them for 25 years, and others are willing to move in 5 when their lifestyle changes. We will assess all of this and the best part – you can also change your goals as you go along.
3. How do You Like to Talk? Many of my clients love to communicate over text, and this works fine. If you prefer the phone or email, no problem at all. For the most part, I’ll communicate with you the way you are most comfortable, but whichever method you prefer, you must be available. Once we have really established what you want and are ready to buy, we often have to jump on opportunities that come up. We need to be a tight team and the closer to buying a home we are, the more we will be talking, likely several times per day.
4. The Buying Process. A big part of the home buying consultation is that we will talk about the buying process, of what you should expect during the home search and how everything goes. Knowledge is power and spending on this will make you more confident once we get started. At this time we will answer any and all questions you may have but also check out our Buyer FAQ section that answers many of the questions have been asked over the years.
5. The Home Viewing. After covering all of those points, I”ll ask you if you feel that we are communicating well and if you are confident that we can do the best job for you. If yes, then we will set up a time to go view a home, with no obligation, so that you can see me in action and see how I work. I think it’s only fair that you get a sense of this before you sign a contract.
After the home viewing together, we will then review the buyer representation paperwork, and all of your options. We firmly believe that a successful experience is all about setting out clear expectations and exceeding them, and communication is critical to making this happen.
Which home is right for you and determining market value?
What Location Should You Choose?
Location is a critical factor. A home with everything you need but in the wrong location, is probably not the right home for you. Here are some things to consider about location.
• Do you want to live in a city, a town or in the countryside?
• How easy will it be to get to where you work? How much will the commuting cost?
• Where will your children go to school? How will they get there?
• Do you need a safe walking area or recreational facility, such as a park, nearby?
• How close would you like to be to family and friends?
What is a Sustainable Neighbourhood?Read More...
A sustainable neighbourhood meets your needs while protecting the environment. Homes in a sustainable neighbourhood are located near shops, schools, recreation, work and other daily destinations. This helps reduce driving costs and lets residents enjoy the health benefits of walking and cycling. Land and services, like roads, are used efficiently. Sustainable neighbourhoods also feature a choice of homes that are affordable.
What is the market value – CMA: Comparative Market Analysis
This is a report that shows a list of other similar homes that have sold in the area, and this is the base level of research. The real estate agent creates this report custom to your situation. This is why it is essential that the agent knows the real dividing lines of each neighbourhood to ensure all the homes selected actually are comparable. If the agent misses a home that sold for much less, or includes a home that sold for more but isn’t actually comparable, you might overpay without even knowing it. It’s very important to thoroughly consider what you are being shown.
Found the right house – now what?
You’ve found the home, determined the value and now it’s time to put pen to paper. Knowing what to expect ahead of time will prepare you for the process and make the experience that much more satisfying.
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MAKE AN OFFER
Negotiations are the most rewarding part of the job, and this is where we separate the winners from the losers. Very few people are good at negotiations, because it’s as much an art as a skill; you can’t just read a book on it. Our team is hand selected for their ability to negotiate (among other things as well). Here is a breakdown of how we set up a flawless negotiating strategy.
What do I mean by this? It begins right with looking at homes, we will train you to keep a tight lip during viewings. You’d be surprised how many times the owners are home… listening….waiting to hear anything from you. Then we do all of our research on the home to find out if it’s over or under priced. If it’s over-priced, we can probably expect the listing agent to call us for feedback, and having them come to us first is the best scenario. If it’s under priced or clearly a high-demand house, I will contact the seller agent more promptly.Read More...
When negotiating, you have to look like you care….but not that much. You like the house…..if the conditions are reasonable. We must be calm and collected, because any level of emotion is a sign of weakness. We will say that you are interested, and that you are a serious, no-nonsense buyer. And then say no more. This is the time to see what information the seller agent will offer. And let us tell you, we often get an outpouring of advantageous information. A previous offer fell through, the sellers have already bought a home, they have young children (aka – very motivated to sell), job transfer, on and on. Or the reverse, such as the owners don’t have to sell, they’re waiting for the right buyer to appreciate the home, they just put 100k in upgrades. Either way, we’ll know if the owners are likely to be stubborn, or willing to work with us.
This is also when I find out if there are other offers registered on the home, which is different than an agent saying they are expecting offers. A serious offer from another buyer must be registered with the seller agent’s office and this information must be shared. If nothing is registered, there is no offer. Now not to say shady games don’t happen, and other agents try to slip in offers without registering them, but any good listing agent wants to create a multiple offer situation if possible, so this is why expressing interest is good so that we’ll be contacted with any new information.
We will take all the information that we can obtain from the seller agent and decide our final strategy on price and conditions.
Submitting the Offer
It is important that you know everything that is going on, and understand everything that you sign. We will:
• Discuss Strategy In Advance. We will consider scenario A, B and C, and what is the likely outcome of each. We will tell you which option will likely be the most effective, given what we know about the market and the seller. Then it is 100% your choice about what option you will go with.
• Request to Present the offer in Person. There is a greater sense of commitment from the sellers if they know you are sitting in the nearby coffee shop ready to get the deal done. Your agent also gets the opportunity to meet with the seller in person, instead passing messages through the listing agent. It’s faster, more direct, and less games are played because the sellers can see we are up front and serious. Fax and scanned offers are becoming more and more common and if this is what the seller wants, we must oblige.
This may surprise you but our goal is to work collaboratively with the seller agent. Too often, emotions damage negotiating power and pride kills deals. We don’t want to disrespect or offend the sellers, because if they get their defences up, they will dig in their heels and stick on their price. When we are calm and stick to the facts, sellers are much more likely to continue negotiating back and forth to make a deal.
When you’re dealing with people, anything can happen. Only our experience and assessment of the situation can tell us when is the right time to push harder or when to step it back a bit. Striking hard often works best when its a fabulous house and you know there’s going to be lots of interest in it. And sometimes we’ve gotten amazing deals for clients by letting the offer sit out there for a few days for the seller to think about. It all depends on demand, and you need a confident agent to know what is the best action.
In all cases, I will keep you updated at all times. Whenever I hear anything I will let you know right away. I respect that this is a highly anxious time for you and I won’t leave you to guess or worry. I will need you to be widely available when we are negotiating an offer, because we will be constantly discussing next steps and strategy.
Offer Acceptance and Closing
FROM ACCEPTANCE TO CLOSING
A great deal happens behind the scenes and most people don’t realize how easily a deal can go sideways if the buying or selling agents don’t complete the necessary tasks and paperwork in the required time frame.
We work with you to fulfill any conditions in the agreement. It is very common to purchase a home with conditions, and the most common are a condition on financing and a condition on home inspection. During this time we:
• Prepare the paperwork to send to your financial institution for final approval
• Assist with arranging the home inspection
• Refer you to qualified professionals if you need assistance; real estate lawyer, home inspectors, mortgage brokers, and so on.
• Guide you & negotiate on your behalf in the event there are unforeseen issues, for example an unseen issue discovered in the home inspection.
• Prepare all paperwork for waivers on the conditions (must be done on time)
• Send all documents to the lawyer (must be done on time)
• Arrange any visits to the home before closing
• Guide you on how the process will work from acceptance to closing
It seems pretty straightforward, but you might be surprised how many times dates have expired, conditions not fulfilled, and a general lack of communication occurs. In the best case, we can sign amendments to the dates (more paperwork!!) but frustration and worry mounts, and deals can fall through. Communication with all parties and meeting deadlines is simple and essential. We do our due diligence to get our clients’ deals to close.