Avoid Disaster When Buying a Home
Buying a home is often the most significant purchase of your life. But that charming little bungalow you’re interested in might really be a money pit in disguise.
In the excitement of the moment, it’s easy to make a costly mistake. So it’s important to keep certain things in mind when making your offer.
First, word your offer carefully. Once you and the seller have signed off on the offer or counter-offer (usually on a form from the Real Estate Board), it becomes a legally binding contract.
Second, budget for more than just the purchase price. You also have to pay property transfer tax (1% on the first $200,000 and 2% on the balance), maybe a 15% foreign buyer’s tax, legal fees, expenses to document and record the transfer and mortgage, the cost of a surveyor’s certificate, and GST on a new home or one that’s been substantially renovated. There will be adjustments for property taxes and such you may have to pay. And of course there’s the moving costs.
Consider putting a subject condition in the contract entitling you to have the purchase contract and the title to the property reviewed by your lawyer before it becomes binding. Titles are sometimes affected by covenants that restrict your right to use the property; for example, you may not be able to construct planned improvements over any easement areas where utilities run.
If the price includes appliances, curtains or chandeliers, list each critical item in the space provided on the offer.
If you need a mortgage, make your offer conditional on obtaining satisfactory financing, even if the bank has “pre-approved” you for a mortgage amount. The financing condition needs to be carefully worded – otherwise the enforceability of the entire contract could be jeopardized.
If you still have to sell your existing home to pay for the new one, your offer should be subject to unconditionally selling it by a certain date. Make sure that the sale of your existing home completes at least one day before the purchase of your new one completes, so you’ll have the money to pay for the new house.
Make your offer conditional on the house and property being inspected by a professional building inspector of your choice and the results being acceptable to you. You want to know whether ants have infested the place or if the roof is near the end of its useful life – basically, any problems with the property a competent inspection would reasonably determine. The seller should be willing to give your inspector reasonable access to the property to do the inspection.
Make sure that you satisfy yourself that the house and any improvements on the property are located within the boundaries of the property and don’t encroach onto adjoining lots. A surveyor’s certificate will establish this.
Get the seller to sign a Property Disclosure Statement, which details problems the seller knows about such as moisture in the basement. Have it form part of your offer so you can rely on it if something turns out to be untrue.
And, pay the deposit to your realtor or lawyer in trust, not to the seller directly. The deposit, normally paid when you make an offer, is an indication to the vendor that you are serious. If you decide not to remove any of your subject conditions, you want no hassle getting it back.