The Buying Process

So you found the house that you want, but what’s next?

Before you sign your name to anything, remember two fundamentals rules. First, work with a lawyer or notary to ensure that your legal interests are being projected. Secondly, give yourself time to think, to see if this is really the home for you.

Before you present an offer to purchase, visit the home at least twice; once during the day and once during the evening. Perhaps talk to some neighbours. Make sure you know what you’re buying. Look carefully at the list of specifications provided by the real estate agent or by the vendor.

Decide on an offer price with your realtor and prepare the offer to purchase. This offer is a legal document and should be taken seriously. It will include all the basic information, including names, addresses, the purchase price, the amount of your deposit, and closing date. If you’re working with a realtor, he or she will draft it up for you. If you’re on your own, ask your lawyer or notary for help.

Make sure that everything you want is included in the offer to purchase. For example, if appliances are included, make sure you list them individually and state that they must be in good working order. Your offer to purchase will either be firm or conditional. A firm offer means that you will buy the property as outlined in the offer to purchase, and that there are no conditions attached. Once the vendor accepts your offer, you are both bound to the agreement.

A conditional offer means that you will buy the property only if certain conditions are met. These conditions have to be significant and have to be listed. Substantial conditions include securing a mortgage, selling your current property, or a satisfactory home inspection. If these conditions are not met, the offer becomes null and void.

If the building inspection only finds a couple of dripping taps, that won’t be enough to withdraw the offer to purchase. After you’ve signed the offer to purchase, your realtor will present it to the vendor. The vendors must give a response before the offer expiry date and time, usually 48 hours after the offer is presented.

But what happens next? There are three possible responses from the vendor if you were to offer to purchase. The vendor can accept your offer, the deal is concluded, and you move on to the next step in the buying process. The vendor can make a counter offer. The counter offer might ask for a higher price or different terms. You can sign the offer back to the vendor, offering a higher price, but ensuring that you know exactly how much you can afford before you start negotiating. You don’t want to get caught up in the heat of the moment and end up with costs that you can’t afford.

If the vendor accepts this counter offer, the deal is concluded. Or the vendor can reject your offer because he or she feels that your offer was too low to counter. If this is the case, you can consult with your realtor or mortgage broker, and determine a higher offer that you can still afford, and present another offer to the vendor. Or you can accept the rejected offered and move on to another house.

If the offer is accepted, congratulations. You’re on your way to closing the deal. Now you’ll need to pay a deposit of around $5k to $10k, which will be applied to the downpayment. This deposit will be held in trust by your realtor or notary.

If you’re buying the property with someone who’s not your legal spouse, have your lawyer prepare a partnership agreement at this time. The agreement should specify which property is being purchased, how much each partner is contributing to the purchase, and a fair way to dissolve the partnership. The agreement will protect both your partner’s legal and financial interests as well as your own.

Generally, when you’re purchasing with your spouse, you’ll be listed as joint tenants. If you’re purchasing with a friend, you are listed as tenants in common. With a joint tenancy, if one person passes away, the property automatically goes to the other person. With a tenant in common relationship, the deceased person’s portion goes to their estate. Once your offer to purchase has been accepted, talk to your mortgage broker. Your mortgage broker will complete your mortgage preapproval or create a new mortgage application.

You will want to schedule your home inspections prior to the subject or condition removal date. If you’re satisfied with the report, you can move forward to the next step. However, if the home inspector finds problems with the house such as a leaky roof, foundation cracks, or electrical issues, you and your realtor can use this report to come up with a list of repairs, and amend your offer to purchase so that the costs of fixing these problems are paid for by the vendor.

You will have until the subject or condition removal date to satisfy the conditions you have written into the offer to purchase, including getting a home inspection and securing your mortgage. You may elect not to remove subjects and conditions on this date if you’re not confident that you can secure the financing that you need, or if you’ve received the home inspection report that includes major problems with the house.

Between the time that the offer is accepted and the condition removal date, you will want to insure that your financing is in place. If subjects are removed and the financing is not in place on closing date, you’re legally bound to pay the vendor the full amount of the sale price, regardless whether or not you have a loan. If you do not remove conditions, the sale does not go through and you deposit is returned.

If you remove conditions on the subject or condition removal date, you can move on to the next step in the buying process. Once the subjects or conditions are removed from your offer to purchase, you’ll need to put down another deposit. This is usually between $20k and $30k. Again, this is held in trust by your realtor or notary.

Once you’ve reached this step, the deposit is non-refundable. Between the time that the subjects are removed and the closing date, you will likely be busy working with your mortgage broker to secure your mortgage. This can take anywhere from 2-4 weeks, so make sure that you keep your mortgage broker uptodate on your buying process.

If you have not already done so at this point, you’ll need to find a lawyer or notary. He or she needs to review all the documents related to your purchase, conduct title searches, and communicate with your lender. The job of the lawyer or notary is to review all the documents to ensure that the transaction is legitimate, and to prevent you and the lender from falling victim to real estate fraud. This process can take anywhere from 1-3 weeks, so it’s best to get a lawyer or notary involved as early as possible.

Your lawyer or notary should meet with you before the closing date to review all the various documents, so you know what you’re signing. These documents will include title searches, mortgage commitment letters, and searches for liens against the property. Closing day is the day when you finally take legal possession and you get to call the house your home.

The final signing usually happens at the lawyer’s or notary’s office. On closing day, your lender will give the mortgage loan funds to your lawyer or notary, and you must give the downpayment minus the deposit, plus all other remaining costs to your lawyer or notary. On the same day, your lawyer or notary will pay the vendor, register the home in your name, and give you the deed and the keys to your new home.

Congratulations, you’re now a homeowner.


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