What You Can Expect when Buying a Home
Buying a home is one of the biggest purchases you’ll ever make and with all the nuances involved in financing, types of construction, value, negotiation, potential renovations, and more – you need a dedicated real estate agent to ensure that you understand that different faucets of your purchase. Below is a quick run-down of the home buying process. This process can vary depending on your individual situation, but the general idea remains.
This information might seem overwhelming, so drop us a line and we’ll plan to sit down to chat about the real estate process, go through any of your questions and get you set up to be successful when you buy your next home. It’s always easier, and more effective, when discussed in person. We’ve also started a blog offering Information for Home Buyers. We want you to have a good, successful real estate experience.
Working with a Real Estate Agent
Should You Use a Realtor?
Truthfully, there is really no good reason not to. Here are the most compelling reasons to use a Realtor® when buying a home:
1) It’s a huge financial investment
Most real estate transactions today exceed $500,000. If you had a tax audit or lawsuit of that amount on your hands, would you attempt to deal with it without the help of an accountant or lawyer? We are here to help you. We are successful when you are successful, which means we’ll work together to ensure you’re happy and educated on the process.
2) Most sellers are using a Realtor®
If you’re negotiating with a Seller, they’ll be getting professional guidance and expert advice. You deserve the same to ensure that your interests are protected.
3) It doesn’t cost the Buyer anything
In almost every real estate transaction the Seller offers compensation directly to the Buyer’s Realtor® upon the completion of a sale. That means that it doesn’t cost you a thing, and even better, we also get our clients a great gift when you officially move in!
Types of Real Estate Agent Relationships:
1) No Agency
This occurs when a Buyer writes an offer with the Seller’s Realtor® with whom they have no prior relationship. Here, the agent’s obligations are to act in the best interest of the Seller NOT the Buyer. This is not recommended for any Buyers.
2) Buyer’s Agent
Your Realtor® owes you the utmost loyalty and must disclose any information which might influence your decision to purchase. A Buyer’s Agent is obligated to protect your best interests.
3) Seller’s Agent
The Realtor® acting for the Seller. Buyer beware here, as the Seller’s Realtor® has no obligations to you and will pass on any information you provide that may be of benefit to the Seller.
4) Limited dual agent
When a Realtor® (or their respective brokerage) is acting for both the Buyer and Seller. There are limitations to the Realtor’s® responsibilities in this situation that both sides must agree to before accepting an offer.
Process of Buying a Home in East Van
Step 1: Know your Financial Situation
Getting a Mortgage
Most lending institutions will pre-qualify you for a mortgage loan before you begin searching for your new home. This will give you the confidence of knowing what you can spend on a home before you begin looking.
What is a mortgage?
A mortgage is not itself a loan, but rather it is an interest in land created as security for a loan. This means that you are actually the one granting the mortgage and in return the bank is the one granting a loan.
The two types of mortgages:
1) A conventional mortgage allows borrowing up to 80% of the appraised value of the property. No mortgage insurance is required, but you’ll need a 20% down payment on the purchase price of the property.
2) A high-ratio mortgage loan allows borrowing more than 80% of the appraised value of the property. Mortgage insurance will be required. You might be able to get away with a 5% down payment on the property.
How much can I afford?
What you will be qualified to afford will depend on several factors, but most banks and mortgage lenders will allow you to borrow an amount that equates to monthly payments up to 32% of your gross monthly income (GDS ratio). This calculation will include the mortgage principal, interest, property taxes, heating costs and 50% of condo fees. Check out our mortgage calculator to get an idea of your affordability.
What is a down payment?
A down payment is the amount of your own money you put towards your home purchase. It will be at least 5% of the purchase price, and can be as high as you’d like. Your Mortgage Broker will go through your options.
What is the amortization period?
Your monthly mortgage payment is calculated as if the loan payments were going to be paid over a set number of years (typically 25 years). This is called the amortization period. The longer the amortization period you choose, the lower the monthly payment. By reducing your amortization period, you will also reduce the interest you pay, which saves you money in the long run.
What is a term?
The term is the length of the mortgage contract. Deciding on the length of the term you want will depend on whether you think interest rates will go up or down. At the end of the term, you are required to repay the full-unpaid balance or to re-finance the mortgage for another term.
Can a mortgage be repaid?
The answer to this question can be found in the repayment clause of the mortgage document. Some mortgages, generally referred to as open mortgages, may be repaid at any time you wish. Other mortgages, generally referred to as closed mortgages, cannot be repaid until the end of the term. Payments allowed prior to the end of the term will be subject to an interest penalty for early repayment. Please speak to your lender about this clause.
Fixed rate or variable rate?
A fixed rate mortgage is one in which you interest rate will remain the same throughout the term of the mortgage and offers the advantage of stability in your monthly payments. In a variable rate mortgage, the interest rate you pay will fluctuate over time in relation to the prime lending rate and can present risk for those on fixed incomes. Historically, variable rates have outperformed fixed rates, but many factors will impact your decision.
Mortgage Brokers are a great place to start when you are exploring your financial options as they typically have more financing options and more flexible lending criteria than traditional banks and will educate you on your different options since they aren’t restricted to only one options (i.e. a bank can only offer their products/services). Also, using a mortgage broker won’t cosy you anything. If you need a recommendation, we have several great contacts that will be more than happy to get you started.
Purchase Costs when Buying a Home
Below is a list of associated costs that you will need to budget for. All of these costs will be needed either during the buying process, or when you officially become the owner:
Appraisal: ~$300, once
When the lending institution requires a 3rd party appraisal of the property for financing purposes – the bank or mortgage lender just wants a second opinion on the value of the property before they approve their high value loan.
Survey: ~$400, once
Only necessary for detached homes where you also own the land, your bank may also require that a survey certificate be presented to them, for similar reasons as an appraisal.
Home inspection: ~$450-700, once
A home inspection is money well spent. With very few exceptions, consider this process mandatory before moving forward with a purchase as you’ll learn what’s wrong with the home from a professional inspector (and almost every home has something you should be aware of). It can also be a great way to learn about how to protect your investment in the future.
Home insurance: ~$400-3000, every year
Lenders require an insurance policy to help protect their interests in your new home. Strata properties will range from $400-800/year while detached homes typically range from $1000-3000/year. I can’t stress the importance of insurance enough. Accidents and the unexpected happens, so ensure you’re protected.
Legal fees: ~$800-1200, once
The transfer of property ownership must be recorded in the Land Titles Office and is done by a Lawyer or Notary.
Property Transfer Tax (PTT): just under ~2% of the purchase price, once
The Provincial Government imposes a tax called Property Transfer Tax – 1% on the first $200,000 and 2% on the balance – that must be paid before any property can be legally transferred to you. First-time buyers may be exempt if they meet the following:
Must not have previously owned a principal residence anywhere in the world.
Must be a Canadian Citizen or permanent resident and have resided in B.C. for a minimum of 12 months.
Must be owner-occupied within 92 days of registration and lived in for at least 1 year.
Subject to a maximum purchase price of $425,000 within Vancouver (sliding scale exemption to $475,000).
Goods & Services Tax (GST): 5%, once, on newly constructed homes
Newly constructed homes are subject to a 5% GST on top of the sale price. Partial rebates are in effect. Call 1-800-561-6900 to verify.
Real Estate Fees
Generally speaking, the Seller pays the real estate fees as part of the transaction. If this is not the case, you will negotiate this amount with your Realtor.
Other last minute costs
Moving and packing fees: Depends on the amount of stuff you have, but well worth it
Connection fees (for internet, TV, hydro, etc): Always ask for a deal from these companies
Move in/out fees (for condos)
Any renovations or redecorating
Identifying what you Want in your New Home
Purchasing a home requires some big decisions, from the neighbourhood you’ll live in, to the price of the property, to your lifestyle, to your 5 to 10 year plan. Investing a bit more time considering your options at the beginning of your search can help you find a property that truly works for you. Look deeper into the lifestyle you are trying to achieve when considering your options. Some things to consider include:
Community: Older community “with character,” or a newer “up-and-coming” community?
Demographic: Who else lives in your neighbourhood?
Transit: How far will you commute? Is transit nearby?
Schools: What are your needs?
Amenities: Shopping? Parks?
Construction style: Concrete or wood frame? Rainscreened?
Exterior siding: What type? Any indication of water ingress?
Roof: How old? Any leaks?
Plumbing: How old? Any leaks?
Electrical: What type of wiring?
Pests: Evidence of termites or rot?
Any moisture issues?
Do you prefer an open floor plan for entertaining?
Do you need a big kitchen? Gas stove? Lots of cabinet space?
Do you need a den or office to work from home?
Is a patio necessary or just an added convenience?
Do you need a lot of storage? An extra parking stall?
Do you like big bedrooms? Or do you prefer extra living space?
Considerations for Condos
How much is in the contingency reserve fund for such things as roof replacement, decorating, repairs and maintenance, etc?
Have any special assessments been agreed upon or have any structural problems been noted, which may lead to a special assessment in the future?
Are pets allowed? What type? How many? How big?
Are owners permitted to rent their units to tenants? How many rental units will be allowed in the project? How many units are rented at this time?
We’ll also take a look at the current Bylaws, Rules and Regulations, the Financial Statements, Minutes of the Annual General and Strata Council Minutes so you can get a sense of how the strata operates.
We offer a very useful service called Custom MLS, which should be a necessary step for anyone looking to buy in East Van. This service will email you all the homes that match your ideal criteria so you’ll never miss a good listing. Try Custom MLS today!
As we start to get a sense of what you’re you’re looking for in a home, we’ll start checking out the homes in person via property tours and open houses.
I’ll schedule a list of properties that might suit what you’re looking for in an hour or two timeframe, and we’ll go to each one together, spend about 10 minutes in each unit before moving on to the next. Seeing a number of properties in a row helps you to clarify what you like and don’t like, and any properties that intrigue you we can book a second showing to see again. I’ll explain some of the nuances of the building construction, and the pros and cons of each unit while we’re there.
You’re free to visit Weekend Open Houses yourself to check out interesting properties. We’ll be in constant communication so I’ll give you a sense of which properties will be worth your time, and you’ll be able to tell me which properties you’ve seen that you liked, so I can offer my professional opinion.
The more properties you view, the more you’ll start to understand what your ideal home will be like.
Making an Offer
Once you have found a property you would like to purchase, a written offer must be prepared – we’ll go through all the details of the contract since we’ll be ensuring that the contract is in your terms. An offer is usually recorded on a standard form called a CONTRACT OF PURCHASE AND SALE.
Your offer should include, at the very least, the following:
Date of offer
Expiry of the offer
Full legal names
Full legal property description Deposit amount
Desired possession date
Any conditions/subjects, which must be satisfied before the sale is finalized
Lists of items included with sale of the property
Negotiating the Offer
When the seller receives your offer, they have three options. Though negotiation starts the first time I inquire about a property on your behalf, this is when every detail of the purchase must be negotiated to ensure you’re satisfied.
1) Accept the Offer
If the Seller signs off on the contract exactly as written, this creates a legally binding contract.
2) Reject the Offer
The deal is dead as the seller does not want to negotiate. You may choose to submit a new offer.
3) Make a Counter-Offer
If the seller changes anything at all on your original offer, the seller is considered to be making a counter-offer. When you receive a counter-offer, you then have the same three options as the seller had. The process of counter-offers may continue until an agreement is reached or one party decides to stop negotiating.
Important Contract Dates
The Contract of Purchase and Sale will detail a few very important dates that we’ll discuss and choose as we’re writing the contract:
Subject Removal Date
This is the date when the conditions or ‘subjects’ of your offer are removed and the deal is considered firm. Once the deal is firm, you are legally obligated to go ahead with the purchase. Failure to do so could have serious legal ramifications, which range from losing your deposit to being sued for specific performance (being forced to buy the home).
The BIG DAY – Here, legal ownership of the property will transfer from the old owner to you in exchange for the purchase price of the property. Congratulations, you are now a home owner! Hopefully you are almost packed and ready to move.
This is the date the lawyer or notary use when determining how to split the costs between the Buyer and Seller for things like property taxes, strata fees, etc. It is used to create a proportional ratio that is applied to expenses that have been paid in advance or that have been deferred for the future. The adjustment date is typically the same day as the Possession Date.
Moving Day! The possession date is typically 1-3 days after the Completion Date and is the day you get keys to your new home. We’ll be there to ensure everything is as it should be.
Common Subject Clauses
Every contract will have subject clauses (also known as conditions) that allow the Buyer to do their due diligence before officially buying the property. These subjects clauses can vary depending on the type of property and the situation, but they typically include:
For any property:
Money well spent – unless the building is brand new or you are intimately familiar with the building. If the inspection reveals something that will cost you money or makes you nervous about proceeding, you can either request that the Seller repair the defects or you can walk away from the contract. Upon occasion, the inspection will discover something that requires further investigation of a specialist.
Simply, this states that if you are unable to arrange purchase financing, you are not required to go ahead with the purchase.
Property Disclosure Statement
This document contains the Seller’s disclosure of everything he/she knows with respect to the property. If there are known defects, they must be disclosed here. If you do not approve of what the Seller lists on this form, you can cancel the contract.
This document will outline the ownership of the property and describe any charges or liens on the property that will need to be discharged prior to transferring ownership. Any right-of-ways or restrictive covenants that may restrict the use or value of the property should be here as well.
The same subject clauses as above, but also including:
Again, a must. This will give you all the information you need to see what shape the Strata Corporation is in. This will include strata minutes, current financials, bylaws, rules and more. Pay attention to any reported maintenance issues, budget problems and any pet or rental restrictions. If you buy into the building, you become part of the Strata Corporation so you need to know how they run and what’s been going on recently in the building.
Parking & Storage Assignment
There are a variety of ways that parking stalls and storage lockers can be assigned within a strata. It is important to determine how they are assigned, where they’re located in the parking garage and how big they are, as it may impact future use.
Many older homes in Vancouver had in-ground oil tanks. These can be both expensive and cumbersome to remove. A quick inspection can help determine whether an oil tank is present prior to subject removal. From there, it is possible to negotiate a resolution with the Seller.
If you are considering any re-development or major renovations, it will be important to check in with the City of Vancouver to verify what development is permissible and what is not. This will include whether or not you are able to add a legal suite.
Once we perform the necessary due diligence and you’re satisfied with the results, you remove subjects on the contract and the deal is official! Now we’ll just wait for the Completion and Possession dates and you’ll be a new home owner!
Preparing for your Purchase
Again, this process is long, and involves a lot of different factors. It’s much better explained in person. Contact the WeLoveEastVan Team to sit down to discuss the home buying process – we’re here to help!