Information for Buyers
1. Why Buy?
Home ownership has many advantages over renting . When you own it, it is first and foremost, your private space! A place for you to enjoy as you please. A place where you make the rules. Decorate it as you want. Renovate it as you want – you’re the boss!
When you rent you are paying off your landlords mortgage. There is a time in most peoples lives when it is appropriate to rent but there comes a time when it is more appropriate to buy. If you have a stable job, without fear of layoff or transfer, you should own rather than rent.
When you own your own home you are building a credit rating with your bank, you are creating stability in your life and over time you will be building equity. Equity is the difference between what you owe on your house and what it is worth, should you decide to sell it. The real estate market does go through ups and downs but overall it goes up, so that down the road, when you decide it is time to move on, you should be able to sell your house for more than you paid for it! Doesn’t that make more sense than renting?
The absolute, very first step, in buying a house is to sit down with your bank or mortgage consultant and have them figure out how much you can afford. You may be surprised at how much money a bank will lend you to buy a house. A word of caution, even though you may be able to "qualify" for a mortgage payment of, say, $800. per month, if you are only comfortable paying $600. per month you should stay with-in your comfort range, assuming you can get what you want with-in your comfort range. Refer to our Mortgage Information for help with your financing.
3. Choosing an Agent
The next step should be, choosing an agent. How do you decide? Do you pick a friend who may be in the business? Do you pick the agent with the most ads on TV, in the paper, or on the Internet? How do you choose?
I think most people start by asking around, amongst their friends and family, if they know someone in the business or, which agent they themselves may have used.
Some criteria you may want to think about would be : experience, reputation & area of expertise. Some agents sell mostly older homes, some agents sell mostly condo’s and others mostly new construction. Most agents sell a little bit of everything, but there are a few who specialize.
You should feel comfortable with the agent you choose. You should be able to trust the agent to give you solid advice. The agent should take a professional approach to finding the right house for you. A good agent has a good reputation that precedes him or her.
4. Finding a Home
Once you have determined your "price range" with the help of your financial advisor, you need to decide what type of house and in what neighbourhood you want to live. Here’s where your agent comes in.
Once you have decided whether you want a condominium, a townhouse or maybe a bungalow the Agent goes to work. He or she has access to the Multiple Listing System (MLS). This is a computer system where all real estate agents place the listing for the houses they have for sale. An agent who is working with a Buyer is able to access this system by typing in the Buyers criteria and the computer will give the agent a list of houses that match.
Buyers may also aid in the search by checking the newspaper real estate section daily, by watching a real estate channel on TV (Homes Plus on Channel 13 in our local area), and of course on the Internet. Most Real Estate Companies have their own site as well as most Agents who have been in the business awhile would have their own personal site.
5. Making an Offer
At what point do you make an "offer" on a house? The answer is, when you have found the house that fits your needs. It may be the first house you see or it may be the tenth house you see. Your Agent will be able to give you advice as to the general condition of the house and as to it’s value. Your Agent will also advise you as to how much you should offer and what conditions you should include in your offer.
All Agents use standard forms designed by the local real estate board (Newfoundland and Labrador Association of Realtors is the local board). These forms have all the standard clauses in them which your Agent will explain to you as well as special conditions you may, based on your Agents advice, want to include such as "subject to an appraisal" or "subject to a professional house inspection".
Please be aware that many Insurance Companies are reluctant to insure older houses, especially the older downtown row housing, so you may want to include a condition in your offer "subject to the Buyer being able to get satisfactory house insurance". Remember, banks will not put a mortgage on a house without adequate insurance.
One more issue to be aware of these days is the environmental issue. If you are interested in a house that has, or had, an oil tank, make sure you include in your offer, a condition that the owner/vendor provide an Environmental Clearance Certificate.
It may be a good idea to go over this form (called the "Agreement of Purchase and Sale") with your Agent before you start the house hunting process so that when the time comes to make an offer on a house you are ready.
6. Offer Acceptance
Your offer has been accepted, now where do you go?
Here’s where you and your Agent go to work. If one of the conditions in your offer was "subject to a professional house inspection" you have to pick a professional home inspector (check our list of professional home inspectors) and hire him or her to perform the inspection within the time frame as set out in your offer.
Some other conditions might include: subject to approval of financing within a specified time, subject to a professional appraisal, if there is a well, you might want to add, subject to a well water test, and so on. Your Agent will advise you as to what conditions are appropriate to put into your offer, and see to it that these conditions are complied with in a diligent and timely manner.
7. Choosing a Lawyer
Once your offer has been accepted and all of your conditions have been satisfactorily met you will need a Lawyer. Your Lawyer will look after your best interests when it comes time to transfer the deed to you. Pick your Lawyer the same way you picked your Real Estate Agent. If you don’t know a Lawyer your Agent may recommend one as well. Once you have decided on a Lawyer you should contact him or her immediately and arrange to meet with them. The Agent will send a copy of all the necessary paperwork to the Lawyer on your behalf.
8. Final Inspection
As the Buyer, you get one final chance to inspect the house you are buying before the money changes hands. This is usually done the morning of, or the evening before the close of the transaction. The purpose of this "Final Inspection" is for you to walk through the house and make sure it is in the same condition now, as it was when you made your offer to buy it. Sometimes, when a home owner is moving out, they may accidentally scrape the hardwood floors or bump the wall with a piece of furniture. This damage must be fixed by the seller or they may offer to compensate you for the damage. Once your final inspection is complete you should contact your Lawyer immediately so that they can send the money to the Sellers Lawyer and then the Sellers Lawyer will send the keys of the house to your Lawyer. When your Lawyer receives the keys they will contact you to come and pick them up.
Congratulations! You are now a home owner!
9. Don't Forget
Many first-time home buyers often forget about things such as house insurance, electricity hook-up, oil delivery, cable hook-up, propane for the fireplace, etc. You make these arrangements once all of the conditions of your offer have been met.