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THE HOME-BUYING PROCESS
Here are 12 steps to Home Buying. Each one is important in making your decision to being a home owner. Some of these steps may have to be done more than once.
#1. Determine - Your wants and needs. Yours needs are more important than your wants. You may want 4 bedrooms but 3 will do. Make a list of both and decide the really important ones.
#2. Pre-Approval - Contact your mortgage broker. They will discuss your current financial situation and determine the amount of mortgage you would be approved for. This is a very important step.
#3. Contact - You will need to find a way to get information on properties that might suit you. Contacting a Realtor is the best way. They will sit down with you and go over your needs and want list.
#4. Tour - The Realtor you choose will set up a time for you to go and physically tour some homes. You may see something the first day that excites you or you may see nothing at all. Both of these situations are important.
#5. Re-Evaluate - The needs/wants list may be too aggressive or not aggressive enough. Your sights might be set too low or high with your financial abilities. (Step #4 and #5 may have to be taken a few times.)
#6. Market Evaluation - When you find a home that you think will work for you, your Realtor will prepare a Market Evaluation. This is a list of all the homes currently for sale, homes that have recently SOLD and some homes that were on the market and did not sell (expired). This helps determine if the price the seller is asking is reasonable in today’s market.
#7. Offer - This is where pen comes to paper. An offer is written. (Contract of Purchase and Sale). This has, among other things, the price you are willing to pay, the dates you want to pay and move in, the subject conditions (financing, inspection, etc.) and the things you want included in the price.
#8. Negotiate - Now is the time for you Realtor to help you get the best price. They will take your offer to the Listing Realtor and/or Seller and present your offer.
#9. Fulfill - Once you have agreed on terms and conditions in the contract, you will need to work on fulfilling the obligations in the contract. You might need to hire a Home Inspector or have the home appraised by the financial institution. Once these are fulfilled you must sign a subject removal making the home yours!
#10. Lawyer/
Notary – You will need to choose a lawyer or Notary Public to do your conveyance. This is when the title to the property is transferred into your name.
#11. Get Ready to MOVE – Now it is a waiting game. You will move into your property at 12 noon on the possession date (unless otherwise specified on the contract). While you are waiting you will need to have all your utilities and insurance put on the property.
#12. Move In - On the assigned day you can physically move into the property. This is the day you have been waiting for.
Documents
You Will See When Buying A Home
(a step-by-step guide to forms and contracts)
“WORKING WITH A REAL ESTATE AGENT”
Buyers and sellers will be presented with this brochure at the earliest contact with a real estate agent. Industry regulations have now made it mandatory for a real estate licensee to disclose the capacity in which the agent will be working with you: i.e. as a buyer’s agent, a seller’s agent or a dual agent, before assisting or representing you in a real estate transaction. The agent will then ask you to sign a statement acknowledging that this disclosure of agency representation has taken place. He or she will tear off and keep the signed statement and give you the brochure for future reference.
Signing the disclosure statement in the Working with a Real Estate Agent brochure does not bind you to any obligation to that real estate agent. It merely confirms that you have discussed your agency representation options with the agent.
PROPERTY CONDITION DISCLOSURE STATEMENT (PCDS)
Every residential listing placed on the MLS must be accompanied by this form which is filled out by the seller. The seller indicates his or her knowledge of various aspects of the property, defects of which he is aware, and any upcoming expenses (as in special assessments in strata-titled properties).
The REALTOR is not permitted to fill out the form. The REALTOR will keep a copy, and may file a copy with the MLS listing in the real estate board. The form does not cover every aspect of the property. A buyer is still advised to consult an independent inspector if there are questions that are not adequately answered.
LIMITED DUAL AGENCY AGREEMENT
This form is used when the agent represents both the buyer and the seller in a single transaction. It is used when the situation involves either one salesperson who represents both the buyer and the seller, or when two salespersons from the same company are involved.
This agreement modifies the prior Listing Contract and the Buyer’s Agency Contract (or verbal buyer’s agency agreement) and gives the agent the authorization to represent both parties in a limited capacity. It authorizes the agent to maintain both parties’ confidences regarding motivation, negotiating positions and personal information (unless either party gives the agent written permission to disclose such information).
CONTRACT OF PURCHASE AND SALE
The Contract of Purchase and Sale standard form is the basic contract signed by the parties (the sellers and the buyers). It outlines every aspect of the transaction, including the price, the terms and conditions, the dates, the inclusions and exclusions, the handling of existing tenancies, the deposit and increase (where applicable) and other legal matters as described in the preprinted contract and added as clauses.
ADDENDUM (WITH PRINTED CLAUSES)
The basic contract will be accompanied by a special addendum form with preprinted clauses where there is either financing to be cleared from the title before the seller can provide clear title, or where there is financing to be put into place after the title is registered in the buyer’s name. The addendum also includes clauses covering the treatment as originals of reproductions of signatures that are sent via telecommunications, issues relating to deposit monies and acceptance by the buyers regarding the size of the property.
ADDENDUM (WITHOUT PRINTED CLAUSES)
The basic blank addendum form is used to write additional clauses on the contract when there is not adequate space to do so on the contract itself. When that has been done, the buyer signs the form indicating that this clause is being removed.
AMENDMENT TO CONTRACT OF PURCHASE AND SALE
This form is used to remove conditions (subject removal) when they have been
date.
CMHC 5% Down Program
For First Time and Repeat Buyers
Effective May 1998, all persons are eligible for the 5% program, which was originally introduced in February, 1992. Prior to May, 1998, this program was available only to first time buyers and those who qualified under certain “hardship” cases.
The new current program is now a permanent product and available to those who can manage the costs of home ownership and have sufficient income and acceptable credit. The following conditions apply to the program:
1. New home must be used for principal residence. (can not be a rental home).
2. New home can not exceed maximum purchase price limits as set by CMHC. For various area, see enclosed list. (usually $250,000, $175,000 or $125,000)
3. Buyers using the 5% down program must take a minimum mortgage term of 3 years. All borrowers have to qualify at the higher of the posted 3-year rate, or the contract rate on their mortgage.
4. A minimum provable 5% equity (plus 1.5% for closing costs), from the buyers’ own resources (including gifts from immediate family), must be in the buyers possession at the time of making an application to CMHC.
5. The mortgage insurance premium under the 5% program is 3.75% of the amount borrowed. If the down payment is increased to 10%, then the insurance premium is reduced to 2.50% of the amount borrowed. With a 15% down payment, the insurance premium is reduced to 2% of the amount borrowed. A further increase in down payment to 20% drops the insurance premium to 1.25% of the amount borrowed, and a 25% down payment usually negates the need for any insurance premium.
RRSP Home Buyers Plan
For First Time Buyers
1. Maximum $20,000 tax free withdrawal for each participant from his/her own RRSP.
2. Must be first time buyer – not owned a home that has been used as a principle residence within the last 5 years.
3. Must intent to occupy home as principle residence within 1 year.
4. Minimum repayment schedule is 15 equal annual installments. This schedule can be accelerated.
5. The funds to be withdrawn must have been invested into the RRSP for a minimum of 90 days prior to withdrawal.
Property Transfer Tax
Exemption For First Time Buyers
1. No property transfer tax for first time buyers. (Normally 1% tax on first $200,000, 2% tax on balance.)
2. A first time buyer is defined here as anyone who has never owned an interest in a principle residence anywhere.
3. Purchasers must be Canadian citizens or permanent residents and have resided in B.C. for a minimum of 12 months.
4. Maximum purchase price is $425,000 for Greater Vancouver and Central Fraser Valley. Other areas of B.C. limited to $225,000.
5. Mortgage financing must be 70% or greater of purchase price.
Note: Maximum, principle reduction is restricted in the first year to: $11,000 for Greater Vancouver and Fraser Valley, $9,000 for all other areas of B.C.
6. Property must be owner occupied principle residence – no rental or investment properties.
7. Mortgage term must be at least 1 year (if term is less than 1 year, the rebate may be applied for after the qualifying individual has resided at the residence for 1 full year.
The 9 Important
Closing Costs
You Should Know About
When Purchasing A Home!
1. Property Transfer Tax
The property purchase tax is payable on the purchase of all real property in B.C. It is calculated based on 1% of the purchase price up to $200,000 and 2% of any amount above $200.000. Most first time buyers are exempt from this if they meet certain criteria. The main criteria are:
a. borrower has never owned a principal residence anywhere
b. maximum purchase price of $275,000 (most areas)
c. borrow at least 70% of purchase price
d. be a Canadian citizen or permanent resident, and been in BC for a minimum of 12 months.
2. Legal Fees
Legal representation will cost you approximately $750 for a purchase, and $450 for a sale.
3. Interest Adjustment
This is the interest you will pay for receiving your mortgage money before the official start of your mortgage (i.e. if your “completion” were on the 23rd of a 30 day month, your interest adjustment would be 8 days interest).
4. Property Tax Adjustment
Generally property taxes for the calendar year are paid at the beginning of July. If you purchase a property before July 1st, the seller will be paying you for the days they owned the home after January 1st. If you purchase a property after July 1st, you will pay the seller for the days you own the property before December 31st. (one day’s taxes on owner occupied properties are – annual taxes divided by 365).
5. Strata Cost Adjustments And Form A Certificate
For strata properties only you will be reimbursed for strata fees you may have paid, or may have to pay for strata fees owed (depending on your purchase/sale date). A Form A Certificate is required only when a strata property is purchased. The certificate is issued in order to confirm that the previous owner does not owe the strata corporation any money. This certificate will range in price up to approximately $50.
6. CMHC Application Fee
This is a $75 underwriting fee paid to CMHC for processing a hi-ratio mortgage application and initiating the mortgage loan insurance. This fee is usually deducted from the mortgage proceeds.
7. Property Appraisal
The property is evaluated by a professional appraiser to determine the market value of the property. This is done to ensure that:
a. the lending institution is not over advancing on the property
b. to protect the borrower from over paying. Appraisals usually cost $200.
8. Survey Certificate
Generally, a bank will require a survey to confirm that the house does not encroach or cross over the property line. The seller will often already have a survey, especially if the seller also had a mortgage on the property. Otherwise, a new survey on a house will cost approximately $270.00. CMHC requires a survey on all hi-ratio insured mortgages. Surveys are not necessary if the purchaser is buying a strata property.
9. Insurance Binder
This is a requirement by the bank to ensure that the purchaser has arranged fire insurance on the new home. Proof of coverage by way on an insurance binder is necessary and usually costs about $35.00. (This is not applicable for a strata property.
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