So, you’ve saved up a stack of cash and are ready to get into the real estate market. Buying your first property can be both exciting and overwhelming. It’s usually a good idea to have a plan.
Fortunately, we have put together a first time home buyers plan for you.
Step 1: Figure out what you can afford.
Looking at houses is fun, but if you’re serious about buying, we recommend figuring out what you can afford before starting your search. In addition to the price you will pay for a new home, you will also have to pay land transfer tax, legal fees and moving costs. The provincial and municipal land transfer tax can be calculated using one of many calculators available online. There may also be some immediate renovations and repairs that you will want to budget for as well. If you’re buying a condo, don’t forget that you will have condo fees in addition to your mortgage payments.
First time home buyers are entitled to a government rebate totalling $5725. You can read more about it on the Ontario Minister of Finance website.
As part of your first time home buyers plan, you will want to meet with a lender to have them figure out how much the bank will give you. This will be dependent on how much you earn, your credit history and the size of your deposit. You can get a pre-qualification done,which is an estimate of the amount a lender will give you based on how much you make and the size of your deposit, but we recommend getting a pre-approval done. The pre-approval takes all of your credit history into consideration and will give you a more accurate number. With a pre approval completed, lenders will lock in an interest rate and guarantee it for 90 days.
Step 2: See what’s available in your price range.
Now that know how much you can spend, the next step is to see how much bang you can get for your buck. As the Toronto market continues to sizzle, the price gap between condos and houses is widening. As the average sale price continues to climb, we recommend figuring out how much (or little) you can get for your dollar. While a condo might not offer the square footage of a house, it is virtually maintenance free. Be sure to factor in all of the differences of owning a house versus a condo into your decision.
The quickest way to see what’s available in the Toronto market is through an online search tool like the GetToronto Search Tool or realtor.ca. The online MLS system offers a quick and easy way search by price, property type, size and location. If you are working with a Realtor, they can set you up to automatically receive listings that match your criteria as they come out.
Step 3: House Hunting: Get a Realtor and Get Educated.
Pictures will only go so far in showing what a property offers. You need to experience the house and the neighbourhood. Open houses are a great reason to get out and explore. We recommend taking the time walk the area to get a sense of who lives there and what’s in the vicinity. If you are working with a Realtor, have them drive so you can take the time to get to know the area. Most people don’t typically find their house after only seeing a couple properties, so as part of your first time home buyers plan, we suggest printing out each listing, taking photos and notes on what you like and don’t like. A good Realtor will know the area and be able to answer questions about the local schools, shopping, entertainment and people who live there.
Step 4: Fall In Love. But not without a home inspection.
Having a wish list is an important part of the house hunting experience, but the reality is that when most people find the right house, they just know. You will see yourself living there and will already be placing your furniture, assigning bedrooms and picking paint colours.
If you’ve been on the hunt for a while, and you’re like most of us, you will probably feel a wave of excitement and urgency to make an offer. Falling in love is exciting and now it’s time to seal the deal. But before you do, we highly recommend a home inspection.
A home inspection ensures that the house is in good working order and meets all building and environmental requirements. While the responsibility is on the buyer, it is common practice for many sellers to do a prelist home inspection. A home inspection is not typically done on a condo unit. Instead, a buyer will request a status certificate that outlines any all outstanding issues with the condo corporation.
When the seller has an inspection done before listing the property, it gives the buyer confidence that the house has no major issues. As part of your first time home buyers plan, we would love to tell you that all home inspectors are equal, it is not uncommon for some to miss something or to overlook certain details in favour of the seller. Depending on the property, we often recommend doing your own home inspection with someone you know and trust.
Step 5: Make an Offer.
Making your first offer can be nerve racking. Having a good Realtor who knows the process, rules and who is a tough negotiator are big assets. We can’t tell you how many times we have seen Realtors miss details that end up costing their clients a lot of money.
Assuming you’ve got a good Realtor, here are the most common scenarios you can expect:
Offer Presentations – When a property is in high demand, sellers will have a specific date and time for buyers to present an offer. This allows the seller an opportunity to market the property and give buyers an equal chance to bid on the house. If there is more than one offer, it puts the buyers in a position where they have to put their best foot forward on price. The presentation will often take place at the seller’s home or the office of the listing brokerage. Offers are presented one at a time by the buyer’s Realtor.
Remote Offers – Offers can be submitted electronically (email or fax). The offer is sent to the listing brokerage as well as the listing agent. Remote offers are typically done when a property does not have a set offer date.
Multiple Offers – This situation occurs when there is one or more offers on a property in addition to your own. Several tactics can come into play around how much you offer, how long the offer is good and any clauses or conditions you may include. Unlike a single offer, multiple offer situations often competitive and re-quire strong market knowledge.
Bully Offers – A very popular type of offer in Toronto, a bully offer occurs when someone brings forward a very
aggressive offer before the night of offer presentations. This typically happens when someone really wants a house and doesn’t want to compete on offer night. The offer price will often be well above the list price and/or market value of the property. The goal with a bully offer is to offer a price that the seller would accept without seeing offers from anyone else. Knowing when and how much to offer without paying too much is not an easy science, but something we are really good at doing.
Negotiations – As is the case in any good sales cycle, negotiations are very common in real estate. A good negotiator will know what initial price and terms to offer and how to get as much as possible from the seller. There are many different scenarios and strategies for negotiating, which requires a Realtor who really knows their stuff.
The Deposit – Even though the bank will be paying for most of the house, a deposit is often required. A deposit means that you have skin in the game and have something to loose if you don’t fulfill your obligations. By putting forward a large deposit, you are showing the seller (and the lender) your commitment to follow through on your purchase. If a deal falls through and it’s your (or your Realtor’s) fault, you will lose your deposit.
A on offer is accepted when both parties have agreed on all the terms such as price, conditions, closing date and deposit amount.
Step 6: Closing.
The deal is done and you’re counting down the days until you move in. The closing date can be any length of time agreed on by both the buyer and seller, but is typically 60 or 90 days from the offer date.
Pre-closing visits are often included in the offer, giving you to access to your new home to take measurements and start planning for your move.
On the closing date, both the buyers and sellers lawyers will sign-off on all the paperwork and your deposit (held in escrow by the listing brokerage) will release the funds.