Over the years I have really listened to what my clients feel they needed to know before purchasing a home, and worked to increase the knowledge and information that I share with them.
Here are the top five things buyers really need to consider when purchasing a home.
- Deposit: Your deposit will be required within 24 hours of an accepted offer. That means before any conditions such as financing and inspection are fulfilled. The rule of thumb for deposit amount is around 5% but it is something that is part of the negotiation and can vary. Many virtual banks require 48 hours to transfer the funds, so make sure you have the money accessible in time for your offer.
- Financing: It is imperative that you are working with an experienced mortgage broker or a senior mortgage specialist at the bank. If you are putting only 5% to 19% down, you want to discuss with your mortgage professional any increased risks as your mortgage will need to be insured and would most likely be subject to a bank appraisal. If the appraisal on the home comes back at an amount less then what you paid for it, you may have a problem. You will want to ensure that there are accurate comparable sold properties to justify the amount you are offering to pay for the home. I always meet the appraiser at the property and bring with me the comparables to show how we determined value. I also send the comparables to the mortgage professional with a breakdown of our calculations.
- Home Inspection: I think this is such an important step, that I will even pay for it for my buyer clients. I want my buyers to review with the inspector whether there is anything that needs to be fixed in order to insure the house. It is especially important to be aware of any immediate repairs required (within 30 – 60 days) in order to secure home insurance. For example; replacing knob and tube wiring or, an old oil tank on the property. I also want my clients to understand not only the immediate repairs required on a house but what needs to be done in the next 5 years as well as the cost of ongoing maintenance. If you need to replace the furnace, roof and windows within 5 years are you going to be able to afford to? It is very important as a buyer that you budget for these repairs. Which brings me to my next point, Budget.
- Budget: When I first start working with buyers, I write up a budget on a potential property within their price range. We account for heating, hydro, utilities, taxes, as well as annual up-keep and repairs that are common in the area they are searching in. Once we complete the inspection and prior to firming up on the sale of the house, we ensure that we have entered all this into the budget and the buyer is comfortable handling all these costs.
- Closing costs: Many buyers underestimate the finances required for closing costs and find that they are a lot higher than they originally anticipated.
The costs to be prepared for are:
- Land transfer tax: In Toronto we have a provincial and a municipal land transfer tax, which can really add a significant amount to your purchase.
- Adjustments: For example, if the seller has paid the property taxes until December and you close in September, you would have to reimburse the seller for your portion of those prepaid taxes on closing. Your lawyer will do a statement of adjustments outlining all these fees.
- Lawyer fees
- Appraisal fees
Before you sign any paperwork ask your lawyer about additional charges and fees that you would incur prior to closing on your property.
©2014 | Belinda Mulford