Buying a property is a complicated process. Here is a brief explanation
of how it works .
You and your REALTOR®
The buying process
Agreement of Purchase and Sale
Closing or Possession Date
Conditions in your agreement
After an agreement is signed
YOU AND YOUR
Buying a property is totally different than buying any other large ticket
item. When you are looking for a car, for example, you must go to the
dealership that has the specific car you want to look at and deal with
the salesperson for that dealership. Real estate is different because
of a system called MLS® that allows one REALTOR® to show you properties
listed with all real estate companies.Here's how it works.
Property owners sign a contract to sell their property with a licensed
REALTOR®. This is called listing their property. These properties
are usually placed on a system called the MLS® system ( Multiple Listing
System). Any REALTOR® in any real estate company has access to information
on any property listed on this MLS® system. So you only have to deal with
one REALTOR® who has access to all MLS® listings. Ask your friends and family
for a referral to a good REALTOR® or interview some different agents and
then pick the one you are most comfortable with. You should choose an
REALTOR® who is familiar with the area you are interested in and the type
of housing you require. There is no cost to you. The REALTOR® is paid a share
of the commission the owner of the property pays.
Once you choose your REALTOR® work with this REALTOR® and only this REALTOR®. If
an REALTOR® knows he/she is working with a loyal client the REALTOR® will spend
as much time as it takes to find you a home. On the other hand if an REALTOR®
knows you are working with several REALTOR®s the REALTOR® will spend less time
looking after your interests. The REALTOR® is paid on a 100% commission basis.
The REALTOR® only gets paid if they are the one that sells you a property.
Pick your REALTOR® and stay loyal. Demand good service and if you don't get
it choose another REALTOR®.
HOW THE BUYING PROCESS
Once you have selected your REALTOR®, you and the REALTOR® will usually meet
to make a plan of action and to sign some paperwork before you get started.
Working with a REALTOR®Pamphlet:
All real estate salespersons must disclose in writing the type of representation
they will be giving you. There are several options including representing
you as an "Agent" and as a "Customer". Usually they
will be representing you as a "Buyer's Agent". The salesperson
will provide you with and explain a pamphlet called "Working with
a REALTOR®". Once you understand the agency relationship you
will be asked to sign a tear off strip on this pamphlet acknowledging
that you have read and understood it. To download a copy of the pamphlet
click here : Download or View
Working with a REALTOR®. For more information on agency click
Buyer Brokerage Agreement:
As noted above real estate REALTOR®'s work on a commission basis. If you
buy a property privately or from another REALTOR® they do not get paid. If
you decide to work with an REALTOR® they may ask you to enter into a legal
contract and sign a "Buyer's Brokerage Agreement". This agreement
outlines the extensive services the salesperson is going to provide you.
The salesperson is contracting to provide these services to you. The buyer
agrees to work with only that salesperson and gives the salesperson the
authority to look for properties that are listed but also those that are
private sale. Usually a part of this agreement is that if you decide to
purchase a property where there is no commission available to the salesperson
that you will agree to pay the salesperson an agreed upon commission.
This almost never happens because most properties are listed on the MLS®
system where the sellers pay the commission and most private sales will
agree to pay REALTOR®s a commission if they bring an acceptable offer to
them. Not all salespeople use this agreement but you should be aware of
it's existence. To view or download a copy of The Buyer Brokerage Agreement
( 2013) click here Dowload Buyer Brokerage
ESTABLISHING WHAT YOU NEED IN A PROPERTY
At your meeting you will also decide on the properties that best suit
your needs. The REALTOR® will later phone the REALTOR®s who have
the properties listed and make appointments for you to view the homes.
Your REALTOR® will then take you to see the homes. After you have viewed
the homes you pick the home that you feel is the right one for you. This
may take several outings but not necessarily. Many buyers find there home
surprisingly quickly. Once you have decided on the property you want to
purchase your REALTOR® will prepare a written offer or what is technically
called an "Agreement of Purchase and Sale" on that property.
or AGREEMENT OF PURCHASE AND SALE
When you make an "offer" on a property you will sign an Agreement of
Purchase and Sale. This is a written contract that you will sign and if
acceptable the seller will also sign. If certain items such as price are
not acceptable to the seller a Counter Offer is prepared by the seller.
This is then presented to you and if the changes are acceptable to you
an agreement is made. This agreement sets out the conditions under which
you are agreeing to buy this property. It is a binding contract between the
two parties and will stand up in a court of law. It is for this reason
that you must understand some conditions that should be in your offer.
PROOF OF IDENTIFICATION
In 2008 the Federal Government, through an agency called Fintrac, made
it a requirement for real estate companies to obtain proof of identification
from sellers and buyers of property. You will need to show a government
photo ID such as a driver's license, a heath card, a passport or other
approved document. Information such as name, birth date etc are recorded
by the REALTOR® on a form provided by Fintrac.
You will be required to write a cheque as a deposit for your purchase. You
will usually be asked to provide this deposit cheque within 24 or 48 hours
after the offer has been accepted or at the time of writing your offer.
This deposit is written to the listing real estate company in trust. The
deposit cheque is only cashed if the offer is accepted. When you write the
deposit cheque you must ensure that there is enough funds in your account
to cover this cheque because it is cashed when it is given to the listing
company. The deposit funds are held in the listing real estate company trust
account until you take possession of the property or what we refer to as
the "closing date". This deposit is credited towards the purchase
price on closing.You can use this deposit as part of your down payment.
This deposit will be returned if all the conditions you set out in your
agreement are not met. For example say you couldn't arrange financing then
the deposit is returned. You also agree to forfeit this deposit if all conditions
are met and you do not go through with the sale.
The amount of the deposit will vary but will usually be a minimum of $1,000.
There are several good reasons for giving a larger deposit. Discuss the
deposit with your REALTOR®
The date you take possession of and pay for the property is referred to
as the "Closing Date". This date is set out in the agreement. You should
choose a date that will be acceptable to both you and the seller. A reasonable
amount of time is usually 4 -8 weeks from the date you make your offer.
This may vary considerably. The owner may require much more time or if the
property is vacant you could take possession within a couple of weeks. Discuss
this with your REALTOR®.
The conditions that can be put into an agreement are endless. I have seen
it all. .However there are several conditions that are standard in
all agreements such as:
Conditional upon the purchaser obtaining financing:
Unless you have the entire amount of the purchase price in cash you should
always put a condition in the offer for financing. This condition will
outline the amount of financing you will need, the interest rate and the
terms of the mortgage. You will be given a set number of days to arrange
this financing, usually 5 banking days. If the lender turns you down for
some reason the agreement is no longer is force and your deposit is returned.
It is a good idea to have a mortgage preapproved before you start looking
for property. This will speed up the time it takes to have your mortgage
approved on a specific property.
Conditional upon the purchaser having an inspector
inspect the property for structural soundness:
Most purchasers have the property inspected by a professional home inspector
after they have an accepted offer. There are many inspection companies
to choose from. Ask your REALTOR® for recommendations. This condition would
set out an amount of days, usually 3-5, for this inspection. In the event
the inspection uncovers structural problems that you were unaware of you
can either renegotiate with the seller to have the seller either pay for
some or all of the work to repair the problems or if the problems are
too much for you to handle then you can declare the agreement null and
void and your deposit will be returned. Most properties have something
wrong with them and the older the property the more things that are wrong.
You should prepare yourself for the inspector uncovering some things and
make your offer accordingly.
Conditional upon the owner providing a "Property
Condition Disclosure Statement":
When a property is listed by an REALTOR® the owner is asked to fill out a
Property Condition Disclosure Statement or PCDS. This form asks the owner
many questions about the structural soundness of the property such as has
the owner had problems with the structure or the electrical or plumbing
system, and many other questions about the property. In your offer you
should ask to see this PCDS and have at least 24 hours to review and accept
this PCDS. This is important. For example if the owner has an ongoing
leak in the basement that is disclosed in the PCDS you may choose not
to go ahead with the purchase.
Conditional upon the owner providing a survey
or plot plan:
You will want to know what the property lines are for the property you
are considering. You should ask for the owner's copy of the location certificate
or plot plan. It is a good idea to have your own location certificate
completed later but having the seller's copy will help you understand
where the boundaries of the property are located.
Conditional upon certain items remaining:
Items such as dishwasher, blinds,drapery tracks,light fixtures and any
other items that you want to include such as appliances, shelves etc.
will be identified in your offer. The list can be endless but should include
all light fixtures and ceiling fans, drapery tracks, mirrors in bathrooms,
blinds and built in appliances such as dishwashers. You should discuss
with your REALTOR® the items you want to include in your offer and the REALTOR®
will write this items into the agreement.
If the property is on well or septic
Conditional upon a water test and the results
meeting the Nova Scotia health standards
If the property has it's water supplied by a well then you will have a
condition outlining provisions for you having the water tested and the
results meeting the standards set out by the Department of Health. Water
is drawn from the well, usually through the kitchen tap. You can either
take the sample yourself or a third party can to do it for you. Your REALTOR®
can only show you how to take the sample. Property inspectors often take
water samples for you at the time of inspection. If you are having any
additional tests completed on the well such as a flow test (see below)
the person doing this test will usually take the water sample for you.
This sample is then taken to the Department of Health Path Lab or a private
water testing company for testing. There is an unlimited number of things
you can ask to be tested and there is a cost for all of them. If you are
getting a mortgage you will be required to have the water tested for bacteria,
arsenic and uranium. You may want to test for other things such as iron,
sulphur and hardness. There is usually a package deal offered by the lab
to test for either the basic things required for a mortgage or a long
list of items. We recommend doing the more extensive test because even
if the property has acceptable levels of bacteria, arsenic and uranium
it may have high levels of other items that will require you to purchase
an expensive filter system.
The results of the water test will take about a week for the basic test
and up to two weeks if you are having the more through test completed.
If the results show the levels are above acceptable levels there are ways
to bring the levels to acceptable levels such as shocking the well and
retesting, installing a UV Light system, installing a water filter system
and more. Your REALTOR® will discuss the options that you have should the
results come back higher than acceptable. Usually this can be worked out
and your sale completed.
Conditional upon a satisfactory water
The amount of water the well is actually producing can be determined
by having a Flow Test completed. This test is completed by a professional
and involves connecting a hose to the outside tap and draining the well
for a set time and then calculating how long the well takes to recover.
These calculations are compared to accepted Provincial guidelines to determine
whether the well is producing enough for your families needs. This is
usually completed within a few days of acceptance of the offer.
As I said the list of potential clauses is endless. Consider the things
that important to you and discuss this with REALTOR®.