Eight things to know when buying your first home, including the professionals who will support you, real property reports and title insurance, property insurance, adjustments, holdbacks and more.
Buying your first home can be an overwhelming and stressful process. Here are my top 8 things to consider when preparing to buy a home.
Note that each province has different real estate rules and processes. While this article is about Alberta processes, the information generally applies across Canada.
1. Get your support team in place
There are four key people who assist with a home purchase: realtor, mortgage broker or specialist, home inspector, and real estate lawyer.
Your realtor sends you tailored house listings and attends house viewings with you. They give you advice on purchase price offers, help you with negotiations, and prepare your contract documents. Using a realtor as a buyer is typically free! Your realtor is paid out of the sales commission paid by the seller.
A mortgage broker helps you find a mortgage that suits your needs and assists you with the lender’s paperwork. Mortgage brokers often have access to special rates and products, and they help you consider options from a variety of different lenders. If you don’t want to work with a mortgage broker, you can contact your bank (or any other bank) directly and speak with a mortgage specialist about their mortgage products.
Your home inspector checks the condition of the house and identifies any problems. They take a thorough look through the home, inspect areas that are not easily accessible (such as the attic), and check to see if the appliances work properly. They will provide you with a final inspection report that will note any areas of concern.
Last but not least, your lawyer will meet with you to review the transaction and sign your mortgage paperwork. They will send your purchase funds to the seller and will register your title and mortgage with the Land Titles Office.
Start looking early for qualified professionals. You can do internet searches, attend free seminars, or go to open houses to meet with professionals. Family and friends can also be a good resource for recommendations.
2. Title insurance v. RPR & compliance: What’s the difference?
A Real Property Report (RPR) is a land survey drawing prepared by a qualified land surveyor. This drawing shows the physical features of the property, including the house, garage and any other structures. A seller typically sends a copy of the RPR to the local municipality for review. If the house and other structures shown on the RPR comply with local bylaws, the municipality will give the RPR a stamp of approval.
Because this process takes time and money, some sellers offer to pay for a title insurance policy for the buyer instead. A title insurance policy protects a buyer from any unknown defects relating to the title of the property, such as improperly located structures, non-compliance with bylaws, or fraud issues.
3. Insurance is a must!
If you are financing, your lender will require you to have home insurance to protect the property. Take steps in advance to familiarize yourself with insurance companies that you want to use. For a condo, the condo board will already have insurance in place for the building and common areas, however it’s recommended to get your own insurance to protect the contents of your unit.
4. Be aware of adjustments and other costs
Be prepared for other costs and make sure you have extra room in your budget. Adjustment costs are the costs a homeowner pays for their property in any given year, such as property taxes, condo fees, and homeowner association fees. The lawyers will calculate the amount of each adjustment to make sure the buyer and seller pay for their fair share of these costs based on the closing date.
Home inspectors and lawyers will charge fees for their services. Typically, you will need to pay these costs before your closing date.
5. All about holdbacks
A holdback is a part of the purchase price that one of the lawyers will hold back if there is an outstanding problem the seller needs to fix after the closing date. Your lawyer will negotiate a fair holdback amount based on the estimated cost to fix the problem. Examples of situations when a holdback is needed are to repair a broken appliance or if a permit is missing for a structure built on the property (such as a deck or gazebo).
6. Closing delays
Closing delays happen on occasion and may result in extra costs and delays. If your lender is late sending mortgage funds to your lawyer (the deadline is typically noon on closing date), then you are responsible for paying late interest on a daily rate until you are able to pay the full purchase price.
Further, if your payment is delayed, the seller may not allow you to take possession of your home until the full price has been paid. Save yourself some stress and do not plan to move into your house right on closing day. Allow for a few days of buffer time just in case.
7. After purchase considerations
Hooray! You have jumped the hurdles and bought your home. Smooth sailing, right? Hopefully so! However, you must keep on top of your three main responsibilities after your purchase:
- Pay your mortgage on time,
- Pay your property taxes and don’t fall behind, and
- Keep your insurance up to date.
If you do not keep up with your three main responsibilities, your lender could take legal steps against you.
8. Final considerations
As a homeowner, you want to take care of your home, including regular maintenance. Make sure you are familiar with your local bylaws and respect the rules of your neighborhood.
It’s also a good idea to make sure your Enduring Power of Attorney and Will are up to date. These documents will specify what will happen to your property if you are incapacitated or if you pass away.
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DISCLAIMER The information in this article was correct at time of publishing. The law may have changed since then. The views expressed in this article are those of the author and do not necessarily reflect the views of LawNow or the Centre for Public Legal Education Alberta.