Your Handy-Dandy Helpers
Buying a home looks easy. You figure out what you can afford, check the MLS listing, drive around a lot, and one day you walk into your dream home. Then you put in an offer, it’s accepted and violá! You’re a homeowner.
Looks can be pretty deceiving. Buying a home involves a host of middlemen, all of whom can offer real value to the process or jimmy up the works. Who you choose for your home team will make all the difference in terms of how smoothly the process goes, and how secure you can feel in your final decision.
The Real Estate Agent
Quarterbacking the whole process is the real estate agent. Watch out for agents who are representing both the seller and the buyer. The dual agency situation may compromise the purchaser’s interest, in that the agent will know what the vendor is prepared to accept. Since a real estate agent’s dual role could mean that no real negotiation ever takes place that should give you pause to think, “Hmmm.” After all, you want to be sure that your real estate agent is acting in your best interest.
Look for an agent who knows the neighbourhood so he’s familiar with whether there are termite problems or leaky basements. He should also be able to provide you with information on local services, such as transportation and schools. Stick with an agent who is at the job full-time, and comes with great references. Some experts believe you should go with a broker. Why? More knowledge, more experience and perhaps a greater commitment to their careers.
Since you only go home buying periodically, and your agent does this day in and day out, look to her to explain the steps in the process. She should give you a blank copy of an Offer of Purchase and Sale to read over so you can become familiar with the format and ask about any terms you don’t understand. And she should be able to estimate those less obvious home-buying costs such as moving expenses, land transfer tax, high ratio mortgage insurance, and the GST payable on it.
Since most agents have a network of people they work with — lawyer, inspector and the like — they can also be a good source for the finding the other players on your home team.
Possibly the most important person in the transaction, the lawyer is often brought into the transaction way too late to be truly useful. Talk to your lawyer BEFORE submitting an Offer. Since the Offer is a valid and binding contract, if a lawyer receives it after its been negotiated and signed, he’s bound to follow whatever is provided in the agreement. Even if he spots a problem, you’ll likely have to live with it. If, for example, the offer doesn’t provide for production of survey, you’ll be responsible for obtaining the survey. Or there may be issues with respect to mutual drives, easements or rights of way that could affect how you use your property.
Since you’re going to ask your lawyer to check over an offer, and you may be negotiating at odd times, you’ll need to have her onside. Look for a lawyer who is willing to hand out her cell phone number or is willing to respond to your page, regardless of what day of the week it is.
Real estate law, like family law and corporate law, is a specialty. The lawyer you choose should come recommended for real estate transactions, and should be familiar with the type of property you’re buying. If your lawyer has only ever closed city properties and you’re buying a cottage, a referral to a lawyer who knows the ins and outs of rural properties will be the best advice your city lawyer can give you.
Your existing relationship with a financial institution may stand you in good stead when it comes time to negotiate your mortgage. Start with a pre-approval. That’ll not only let you know what you can reasonably afford, it can make your offer more attractive for sellers. However, just because you’ve been pre-approved doesn’t mean you should eliminate the “conditional on financing” clause from your Offer. Your pre-approval is conditional on your home passing muster with an appraiser, so your offer should be conditional on your financing being approved.
If you don’t have a relationship with a bank, your agent will usually be able to help here as well since good agents usually have established relationships with lenders on whom they can call.
While your existing relationship may get you an easy pre-approval, don’t stop there. If you’re a good customer, the opportunity to win your business may motivate another lender to offer you a better deal. Always give your first institution the opportunity to match the offer before you move.
This middleman is behind the scenes and out of your control. But what he has to say will impact on your home buying decision. If he decides the home you’re buying is priced too high, that’ll affect your lender’s decision to grant you a mortgage. (Your real estate agent should have been able to tell you if this was likely to be a problem, since he should be familiar with the neighbourhood prices.)
Most appraisals are “drive-bys,” which do not require a detailed home inspection. However, if the home is priced significantly above or below market prices, the appraiser may want to do a more detailed inspection. The appraisal cost is paid by the lender and passed on to you, unless you negotiate for no appraisal cost upfront with the lender.
Your Home Inspector
Home inspectors — be they engineers or contractors in a previous life — are the only people who can identify structural defects within a house, and what it will cost to make the required replacements or repairs. Since the principal of caveat emptor –buyer beware -- is applicable to purchases of real estate, make your offer conditional on a satisfactory home inspection.
The principal of caveat emptor also applies to hiring a home inspector since anyone can call himself an inspector. The industry is unregulated. While a personal reference is important, look for someone who is certified or registered with a provincial or national association, such as the Provincial Association of Certified Home Inspectors (PACHI) in Ontario. To be certified or registered, inspectors participate in on-going training. And good inspectors will carry errors and omissions insurance.
While many home inspectors do not offer a warranty, those that do will charge more. Watch for lots of exclusions and restrictions in warranty contracts. There’s no point in buying a warranty that isn’t worth the paper it’s written on. And beware of inspectors who offer to follow-up with home repairs.
Since a home inspection is visual, what it won’t identify is anything that’s hidden behind finished walls. So sewage and drainage problems may not be uncovered, and central air problems won’t come to light if the inspection is being done in the dead of winter.
A home inspection should take about three hours. Be there to see what’s being done. And a good real estate agent will be there too since she’ll want to hear what the problems are.
Above all else, the relationship you strike with the members of your home team will be the most important ingredient in the mix. Not only must you be sure you’re hiring the right professionals for the job — check their references to see if they’re as good as they say they are — you must be able to trust them.