First Time Buyer's Guidelines

PRELIMINARY PLANNING

You decided to buy your own home. What are some of the things your will need to do in order to make a wise choice? This guideline will help you make the best choice to suit your circumstances and needs.

Before you embark on your search for the perfect house, it is important that you make a realistic "shopping list" in an attempt to narrow your choices of properties. Hunting for a home can be a time consuming process, especially if you have not determined in advance the parameters of your search.

Many homebuyers make the mistake of misinterpreting a WANT as a NEED. As a result, they often dismiss homes that perfectly fit their needs in search for one that has their wants. This is not to say that you cannot have what you desire in your home--just that you must be able to differentiate between what you truly need and what you would like to have. Note, also, that in the examples below, many WANTS can be changed in a particular home (if the house doesn't have that feature now, you can change it later).

Examples of NEEDS

Enough square footage for comfortable living

Enough bedrooms to accommodate your family

Adequate number of bathrooms

Eat-in kitchen

Garage or basement for storage needs

Lot size to accommodate children's play area

Adaptation for Handicapped

Proximity to a specific school

Examples of WANTS

Carpeting color, paint color, exterior color, roof color, etc.

Pool or Jacuzzi (unless for medical reasons)

Wood floors

Bay windows

Built-in entertainment center

Brass lighting fixtures

Skylights

A pretty view

Take a few minutes to develop your own list of NEEDS and WANTS. You can print out a scorecard here that you can use as you begin to evaluate homes. The goal is to put the emphasis on finding a house that includes all of your needs and as many of your wants as is practical--yet remains in your budget. Once you have a clearer view of what your house will need to have, the next step, actually looking for a home, will be a great deal easier!

CHOOSING THE NEIGHBOURHOOD

Hints when looking for a good Neighbourhood

Choose the neighbourhood, house style and amenities you require. Consider number of bedrooms, bathrooms, parking facilities, transportation etc. Make a list of your "must haves" and "like to haves" and prioritize it. You can get an idea of house styles and prices in various neighbourhoods from internet sites like Realtor.ca or MLS.ca or your local real estate board.

Stop the car! There it is. The perfect house.

Congratulations. You have finally found the home that you have been searching for these past few months. It is everything you have dreamed of and the price is very reasonable. Hmmm. Why is it so reasonable?

Perhaps it is time to take a good long look at the neighbourhood.

Location

* Where are the schools?

* How close is public transportation?

* How far away is the shopping centre?

* Are there any parks or recreation centres nearby?

* Are there any churches, daycares or playgrounds in the area?

Pride of Ownership

* Are the other homes well landscaped?

* Are the exteriors looked after?

* Are there sidewalks?

* Are there street lights?

Demographics

* Is this an area of young families?

* Is this an area of seniors?

* Is this an area of singles?

* Is it mixed age groups?

Neighbourhood Problems

* What is the crime rate?

* Are the schools safe?

* Is there heavy traffic?

* Is there a lot of air pollution?

* What about noise pollution?

* Are there any abandoned buildings in the area?

Choosing a neighbourhood is as important as choosing the right home. Both should be given the same consideration.

Next, get your finances in order. Determine what you have as a downpayment and ensure that you have funds available to use as a deposit when you are ready to make an offer on a property. Try to establish a good credit rating by practicing good payment habits. Use a credit card to establish a credit rating but not to accumulate debt.

SELECT A REALTOR

Choose a realtor with whom you have rapport, who listens to you and understands your needs. Read Agency Relationships Explained provided by the Toronto Real Estate Board or Working with a Realtor published by the Ontario Real Estate Association and discuss agency issues with your realtor.

You will likely want to sign a Purchaser Agency Agreement with a Realtor to ensure the agent will be working in your best interests. Understand what you are signing and make changes to the standard agreement if required. Discuss under what conditions the agreement can be terminated if you are unhappy with their service. Being loyal to one agent will ensure that he/she will work diligently for you.

The realtor is usually paid commission from the transaction as stipulated in the listing agreement between the seller and his agent so it does not cost you anything to have your own agent working on your behalf.

Meet with your realtor and discuss your list of "must haves" and "like to haves". Your realtor will select appropriate properties and make an appointment to view them with you. Be sure to offer your feedback about what you like and don't like. Your feedback helps the realtor to refine the search and zero in on the best properties for you.

Remember no home in your price range will be perfect so don't eliminate an otherwise good home just because of something that can be easily changed like wallpaper, paint colour, or cleanliness. If you can see the potential in a property you can still get a good deal. At some point you may have to re-define your needs or priorities or make some compromises if your original expectations prove to be unrealistic. First time buyers may have to compromise and buy a starter home first and move up to their dream home in future years.

A realtor will help you determine what you can afford and what kind of home will best suit your needs.

A realtor will then provide you with a list of homes for sale that are in your price range and possess all the qualities you require.

A realtor saves you a lot of running around and wasted time by providing you with a list of quality homes and securing appointments to view them.

A realtor has a wealth of information on everything from financing to amenities within the community.

A realtor will negotiate on your behalf to make sure you get the best possible price.

DETERMINE YOUR PRICE RANGE

The down payment plus the amount you can borrow determines the price you can pay. There are calculators on the bank websites to help you calculate what you can afford based on your income and down payment and your agent can also work it out for you. Determine how much down payment you can come up with. You may be able to borrow up to $20,000 per person from your RRSP to apply to the down payment without any tax consequences under the Home Buyer's Plan.

Take a realistic look at the price you can afford. There are two general rules of thumb that you can use for deciding what price you can afford.

GET A PRE-APPROVED MORTGAGE

Get pre-approved for a mortgage so you will know how much you can borrow and what it will cost. You might like to deal with a bank with whom you already have a relationship but be sure they give you a competitive rate. Rates are negotiable. It is usual to bargain for a rate lower than the published rate. Your realtor can also refer you to lenders with whom they have a good working relationship and can get special rates.

Lenders will tell you in advance what they are willing to lend you and will guarantee an interest rate for 2 or 3 months which is protection in case rates suddenly rise.

Having a pre-approved mortgage will make your offer more attractive to the seller as you will be able to arrange the financing more quickly.

MAKING AN OFFER

When you find the home you like, you should have your agent prepare an offer as soon as possible as you will be disappointed if it is sold to someone else while you are dithering. Your realtor will give you information on comparable properties to help you determine an appropriate price to offer.

The offer identifies the parties and the property, the price you will offer and how you propose to pay it--deposit, balance of downpayment and mortgage proceeds--and the closing date. It also lists any chattels you want included (for example appliances) and specifies any fixtures to be excluded.

You should include any conditions you require such as time to arrange financing or having a home inspection or for a condominium reviewing the status certificate.

Warning! In a hot market unconditional offers are more attractive to the seller and the time allowed to satisfy the condition should be as short as possible. If there are multiple offers the most attractive one wins and there is usually someone willing to pay top price without conditions. There is some risk involved however, in making an unconditional offer.

Be aware that there are some additional expenses, most notably land transfer tax in Ontario, which you will also have to pay on closing in addition to the purchase price. Be prepared to write a cheque for a deposit to accompany the offer. The deposit will be held in trust usually by the listing broker and is applied to the purchase price on closing. If the offer is not accepted or the conditions not met the deposit will be returned to you. An agreement to purchase property is a big commitment. Make sure you understand what you are signing and be sure to ask your agent any questions that concern you.

NEGOTIATING AN OFFER

Your agent will make an appointment to present the offer to the seller through the listing agent. The seller can accept the offer, reject it, or sign it back to you with changes which you can either accept, reject or change and sign back to the seller as a counter-offer. This process continues until an agreement is reached or until the negotiations are terminated.

When an agreement is reached, your deposit cheque will be turned over to the listing broker to be held in trust to be applied to the purchase price on closing.

After the offer is accepted, your agent will assist you to fulfill any conditions such as financing and home inspection so they can be waived within the permitted time period. Once the conditions are removed the documents are passed to your lawyer who will search title and attend to all the paperwork. You must arrange for fire insurance coverage and arrange for utility services to be transferred to your name. A day or two before closing you will meet with your lawyer to sign all the documents and provide the funds required to complete the transaction. On the closing date, your lawyer meets with the seller's lawyer and keys and payment are exchanged.

Congratulations on your new home! Enjoy and have a nice housewarming!

BUYING A NEW HOME

Once you have made the exciting decision to buy a new home, careful research is a must. The following checklist will help you get started and make your search a little easier.

Determining a price range is the first step.

Now that a price range is established it is time to decide where you want to live. Research the neighbourhood thoroughly before making a commitment.

Select a quality builder. Ensure that the builder belongs to a professional association with a strict code of ethics. If there is a New Home Warranty office in your area, ask them for a list of registered builders. References work. Ask for recommendations from people who have recently built. Talk to at least three registered and recommended builders before choosing one.

Check out the quality of work in the builder's previous homes and talk to the homeowners. Ask about a follow-up system for any problems you may have after you have moved in.

Contact a real estate office and request a realtor who specializes in new homes. Someone who is familiar with the professional home builders in your area.

Some important questions to ask yourself before building your home:

How long will I stay here?
How many will live here (will it increase or decrease over time)?
How many bedrooms and bathrooms are needed?
Do I need a finished basement ?
Do I need a formal dining area or just a large kitchen?
Do I need a room for a home office?
What are my storage requirements?
Will there be boarders?

Do I wish to (or can I afford) to upgrade some of the standard choices?
Your must haves and your would be nice choices should be discussed with your professional builder. The builder will be able to help you achieve the maximum from your budget by offering you alternatives to costly projects.

Just remember, builders and developers are not Realtors and are not bound by the Real Estate Act. This means that an uninformed buyer may discover that the property they purchase is nothing like the property they were sold. Furthermore, because their builder is not covered by Errors and Omissions insurance, the unwary buyer may find themselves solely burdened with fixing problems left behind by the builder. Having an agent asking the right questions on your behalf and working for your protection is the surest way to ensure the timely and accurate fulfillment of your builders contract.

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