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Buying a house is a complicated process. Here is a brief explanation of how it works .
You and your real estate agent
The buying process
Agreement of Purchase and Sale
Deposit
Closing or Possession Date
Conditions in your agreement
After an agreement is signed
Closing costs
YOU AND YOUR AGENT
Buying a house is totally different than buying any other large ticket item.The owners of the houses list or sign a contract to sell the house with a licensed real estate agent. The owners pay the agents a commission when the house is sold. These houses are listed on a system called the MLS system ( Multiple Listing System).Any agent in any real estate company has access to information on any house listed in the Halifax area on this MLS system. Unlike car buying where you have to deal with different salespeople for different types of cars you only have to deal with one agent who has access to all MLS listings. Interview some different agents and then pick the one you are most comfortable with. You should choose an agent who is familiar with the area you are interested in and the type of housing you require.Once you choose your agent work with this agent and only this agent. If an agent knows he/she is working with a loyal client the agent will spend as much time as it takes to find you a home. On the other hand if an agent knows you are working with several agents the agent will spend less time looking after your interests. An agent is paid on a 100% commission basis. If the agent sells a home the agent gets paid. If the agent doesn't sell a home the agent doesn't get paid. Pick your agent and stay loyal .Demand good service and if you don't get it choose another agent.
HOW THE BUYING PROCESS WORKS
Once you have selected your agent, you and the agent will usually meet to make a plan of action and to sign some paperwork before you get started. All agents must disclose the type of representation they will be giving you. Usually they will be representing you as Buyer's Agent. The agent will provide you with and explain a pamphlet called " Working with an agent". 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. ( For more information on agency go to http://www.sandyhines.com/agency.htm )At this meeting you will also decide on the properties that best suit your needs. The agent will later phone the agents who have the properties listed and make appointments for you to view the homes. Your agent 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 on the first outing. Once you have decided on the property you want to purchase your agent will prepare a written " agreement of purchase and sale" on that property.
THE OFFER or AGREEMENT OF PURCHASE AND SALE
When you make an "offer" on a house 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 owner 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 house. 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.Deposit:
You will be required to write a cheque as a deposit when you sign the offer, or sometimes within 24 or 48 hours after the offer has been accepted. This deposit is written to the listing real estate company in trust. The deposit cheque is only cashed if the offer is accepted. It is held in the listing real estate company trust account until you take possession of the house 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 be a minimum of $1,000. There are several good reasons for giving a larger deposit. Discuss the deposit with your agent
Closing Date:
The date you take possession of and pay for the house 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 house is vacant you could take possession within a couple of weeks. Discuss this with your agent.Conditions:
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.
Conditional upon the purchaser having an inspector inspect the property
for structural soundness:
Most purchasers have the house inspected by a professional home inspector
after they have an accepted offer. There are many inspection companies
to choose from. Ask your agent 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 houses have something wrong
with them and the older the house 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 agent 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 house 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 owners copy of the location certificate
or plot plan. It is a good idea to have your own location certificate
completed later but having the sellers 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, carpets, drapery tracks, mirrors
in bathrooms, blinds and built in appliances such as dishwashers. You
should discuss with your agent the items you want to include in your offer
and the agent will write this items into the agreement.
Conditional upon your lawyer reviewing and approving the agreement:
As a protection against your agent missing something or writing a
poor agreement it is a good idea to have a clause for your lawyer to review
and approve your agreement. This is usually 2 business days from acceptance
of the offer.
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 being satisfactory. You physically take samples of the well water
and bring small bottles of water to the Department of Health for testing.
The Department of Health will test the water for a fee which is usually
less than $100 for such items as bacteria, arsenic and uranium. There
are levels that they have determined as satisfactory. If the water does
not test within this parameters your agreement becomes null and void and
your deposit is returned. The time given for this test is usually at least
7-10 days. Your mortgage company will insist on seeing the results of
these tests as a condition of your mortgage.
Conditional upon a satisfactory water flow test
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.
Other Conditions:
As I said the list of potential clauses is endless. Consider the things
that important to you and discuss this with agent.
Once an agreement is in place you proceed and getting the conditions of the agreement satisfied.
1)Arrange for a building inspector to inspect the property. Your agent can recommend inspectors for you to call and set up a time,usually the next day or two, to inspect the property. See my section on Property Inspectors for details.
2)Formally apply for your mortgage. You immediately call a mortgage lender and apply for your mortgage.
3)Hire a lawyer. Your lawyer will search title and deal with the seller's lawyer on your behalf. It is common that your agreement is conditional upon your lawyer approving the agreement. If this is a condition have a copy of the agreement sent to your lawyer right away for his approval. You will usually only meet the lawyer on the closing day.
4)Arrange to have other conditions met. There will likely be other conditions in your offer that have to be met.
5)Once your mortgage is approved and all conditions are met you arrange your move and wait until the closing. The day of or the day before the closing you will go back to the property with your agent for a walk through called a Pre Closing Inspection. This is to see that the property is in the same condition as when you bought it and any items you asked to remain are still in the property.
6)Closing. After your final walk through or often before,you will meet with your lawyer and sign the final closing papers. On the day of closing your lawyer will transfer the funds to the sellers lawyer and once that is completed you will receive keys to property. The property is officially yours at this point.
7)Start moving. Most agree this is the fun part.
Summary:
Above is a brief explanation of the process. There are many twists and turns along the way. Your agent is there to make sure the process is as easy as possible.
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