FAQ

Questions Asked Before Starting Your Home Search

How much do you charge?

Commissions are how most real estate agents are paid for the homes they sell. This commission can vary from province to province and among brokerages. But here is something you might not know:

If you’re buying a home, you’re probably off the hook for paying the real estate agent fees. The Seller usually pays commissions for both Buyer and Seller. Typically, the fee is paid by the seller at the settlement table, where the fee is subtracted from the proceeds of the sale.

The real estate agent fee is typically paid by the seller to the listing broker who, in turn, shares part of it with the agent who brings a buyer to the table.

How long until we can move in?

Although the time you can move in after we negotiate a deal for you the average is typically anywhere from 14-60 days. This number varies depending on the timeline we are able to negotiate for you. Please let us know what your preferred timeline is and we will do our very best to negotiate the closing date as close to your date as possible.

What happens if there is more than one offer?

Sometimes there will be multiple buyers interested in the same property for sale. The seller may receive more than one offer to purchase. This is called a multiple offer situation, and whether you’re a seller receiving the offers, or a buyer making one of the offers, there are different ways to proceed.

Discuss your options with your real estate professional before proceeding.

Seller:

In multiple offer situations, it’s the seller who determines what process will be followed.

When there are multiple offers on your property, your real estate professional should:

  • immediately tell you of the multiple offer situation
  • explain the choices you have and strategies available for offer presentation
  • recommend you look at each offer before making a decision
  • advise you of the buyers’ options and indicate that buyers may, and often do, remove their offer in a multiple offer situation
  • inform you it is your choice whether to disclose the multiple offer situation to the buyers
  • NOT disclose a multiple offer situation without your consent
  • follow your lawful instructions
  • try to present all offers in the same time frame
  • discuss with you any commission adjustments that may be in certain offers, and whether you wish to share this information with all other buyer representatives
  • continue to present all offers to you up to the end date of a previous offer or to the end of the seller representation agreement
Buyer:

When there are multiple offers on a property on which you have submitted an offer to purchase, your real estate professional will:

  • tell you of the multiple offer situation (if they know)
  • advise you of the seller’s options
  • attempt to personally attend the offer presentations
  • advise you of YOUR options, including:
    • increasing the offer prior to presentation.
    • leaving the offer as it is.
    • withdrawing the offer.
    • reconsidering the fixtures, chattels, terms and conditions of the offer.
  • advise on other considerations that could improve your position including:
    • a term or condition that will compel the seller to deal with the offer at the time of presentation or face withdrawal
    • a requirement that the seller not disclose the price and terms to any other buyer or face withdrawal

Multiple offer situations aren’t uncommon, especially in a hot market. If you are in such a market, to save time (and possibly get your offer read first), you, as a buyer can:

  • consider how much higher in price you are willing to go with your offer should the need arise
  • consider which, if any, terms or conditions you are willing to remove from your offer, and which you would remove first, should the need arise
  • consider your willingness to change the possession date to one that is more favourable to the seller, should the need arise

Your ability to quickly decide on your course of action could be the difference between your offer being accepted or rejected by a seller with multiple offers.

Source: www.reca.ca

I own a home, should I buy another before selling my current home?

There are a number of factors to consider when moving between properties. The first consideration is cost. Can you afford to hold two properties should your current home sit on the market and not sell for a few months? If you can afford this option you are best to move forward with a 20% down payment to avoid unnecessary CMHC fees—fees that would be added to the purchase price of your second home if you put down less than 20%. However, by opting for an open mortgage or a home equity line of credit on the new home you could then put more money against the purchase of that home once your present house sells.

Another option to consider is to put in an offer on your new home with a condition that stipulates that you can back out of the purchase should your current home not sell. This option is called a “Subject to Sale Offer” and considered a standard clause in most markets,  except really hot markets where competition can heat things up.

No matter what you decide, make sure you have a detailed conversation with a mortgage broker and your realtor, so that you can truly understand your options and their related costs.

What are restrictive covenants?

Restrictive covenants are “building schemes” that operate outside of—and in addition to—municipal zoning bylaws. They are designed by developers to maintain the value of the properties located in a given subdivision by ensuring consistency in the type or colour of roof, the exterior wall material or fences, for example.

These obligations “run with the land” and are binding on any future buyer of the property. If a homeowner disregards the restrictions when building a fence or replacing the roof, then any other person who lives in the community and has the same restrictive covenant registered on their title is entitled to go to court to enforce it. This could include a court order for the forced removal of the non-complying structure. While most restrictive covenants are fairly harmless, occasionally a serious problem is identified on closing that can jeopardize a sale.

The more serious problems tend to arise most commonly (but not exclusively) in older inner-city subdivisions where old restrictive covenants registered on titles typically include restrictions on use (such as only a single family dwelling being permitted) and on the location of buildings (such as the setback from the street). In some instances, these restrictive covenants are stricter than the obligations set out under the existing zoning bylaws. Since municipalities are only concerned with their own regulations, it is entirely possible for a home or garage to be built in compliance with municipal regulations but in contravention of the restrictive covenant on the title. The property might even have a
real property report with evidence of municipal compliance.

Such a development would, however, still be considered to have a “title defect” and not be marketable if the non-compliance with the restrictive covenant was recognized at the time of closing. After all, what buyer would wish to purchase a home in circumstances where the neighbours could go to court at any time to demand its demolition! The most striking non-compliance that I have encountered in my practice is a fourplex constructed on a lot where the restrictive covenant specified that only a single family dwelling be built.

Municipal bylaw non-compliance applications for relaxations and encroachment agreements are fairly routine (and up to 99% of such applications are granted). However, fixing restrictive covenant noncompliance issues is an arduous, expensive and uncertain process involving an application to the courts.

Usually all affected neighbours having the same restriction on their titles will need to be served with notice of the court application, and if any one of the neighbours objects, the application will fail. As a result, only around 50% of such applications succeed. In some militant communities, the odds of success are even lower.

Due to this uncertainty and the fact that it can take several weeks for an application to be brought to the courts, most buyers who discover a restrictive covenant problem will choose not to take possession nor transfer the title and pay the purchase price until the problem is resolved.

Since the insertion of the clause 6.1(g) warranty in the standard AREA Residential Real Estate Purchase Contract in December 2010, any breach of any restrictive covenant registered on the title also constitutes a breach of the seller’s warranty with accompanying remedies of rescission of the contract and/or compensation for damages. It should be noted that title insurance is not a solution to this problem. Any known title defect has to be disclosed to the title insurer and they will limit the owner’s coverage by excluding loss of marketability protection (loss of resale value) from the policy. Due to these potentially very severe consequences what can industry members do to minimize their risks? First of all it goes without saying that both the Seller’s agent and Buyer’s agent should be searching and reviewing the title to any property that will become the subject of a sale or a purchase.

Copies of any restrictive covenant registered on title should be obtained and reviewed to see if there are any use or setback restrictions that could create a problem with the sale. In general, the older the restrictive covenant and community, the higher the risk of non-compliance. This rule is not, however, universal and some newer communities (such as Calgary’s McKenzie Towne) also have setback restrictions registered on property titles.

This issue also exemplifies why Real Property Reports should be secured and reviewed as soon as possible in the process. Seller’s agents should always obtain copies of RPRs from sellers at the listing stage and review them to ensure that all structures on the property are shown and also to ensure that the buildings comply with any restrictive covenant setback requirements. If the seller does not have an existing RPR, then a new RPR should be ordered immediately.

From a buyer’s perspective extra due diligence is required in the purchase of infill homes in inner-city communities. In those instances it is not a bad idea to insert a term or even a condition obligating the seller to provide an RPR to the buyer for their review early in the process. This will enable the buyer to verify the home’s compliance with restrictive covenants on title. If problems are discovered early, they are much easier to address at that point than on the closing day.

Conclusion

While restrictive covenants can be an issue in virtually any real estate transaction, the problems are much more prevalent and significant in inner-city communities and, in particular, with infill properties.

In representing either a seller or a buyer of a newly built infill home/duplex, or a developer intent on subdividing an existing property and building two or more homes on a lot, it is critical that any restrictive covenants on title be reviewed to verify that the structures (or intended use) are permitted. This will help to avoid unpleasant complications on closing.

What is an encumbrance?

A claim against, limitation on or liability against real estate is an encumbrance. Encumbrances include liens, deed restrictions, easements, encroachments, and licenses.
An encumbrance can restrict the owner’s ability to transfer title to the property or lessen its value. It represents some right or claim of another to a portion of the property or the use of the property.

 

Liens

Liens can come from a variety of directions.  If you don’t pay your property taxes or your income taxes, you can have a lien placed against your property.  When it comes to the IRS, you can even have blanket liens placed against you in multiple states.
If you have major work done on your heating or air conditioning system and you don’t pay in full, you could find a mechanic’s lien on your home when you got to sell it.  It will have to be paid before the home can change ownership.  Any work to the property that isn’t paid for could result in one of these liens.  It’s good practice to retain receipts and canceled checks for all work to your home, and for major stuff get a lien release as well.
Non-payment of local property taxes, or even water and sewer bills can result in a lien as well.  HOA, Homeowner Association and Condominium association dues and fees must be paid, or you’ll likely find a notice that a lien has been filed.  If the city places sidewalks and you’re legally assessed a portion of the cost and do not pay it’s a lien.  It’s just good sense to know how liens work to protect your ownership and interest in your property.
Liens can come from losing in a lawsuit as well.  The lawsuit need not even be related to your home or an injury or claim about it.  If you own your home personally and your sole proprietorship business is sued, a loss could result in a judgment against you and a lien being placed on all of your assets, your home included.

 

Deed Restrictions

Deed restrictions, as the name implies, are written into deeds.  They pass from owner to owner forever.  So, if a property owner decides to sell and has a restriction placed in a deed as to what future owners can or cannot do on the property, it’s an encumbrance.  These can be troublesome, especially when large parcels are broken up and sold off as parts of an estate.  If the owners and heirs restrict the use to agriculture or ranching and preclude ever having a business on the land, then that passes forward from owner to owner.

 

Easements

Easements are very common.  Utilities place easements around and along property lines to be able to install and maintain electric, water, gas and sewer lines.  Roads and streets have easements taking up some of property along property lines.  I’ve seen rural area easements for surrounding property owners to cross another’s property lines to get to theirs.

 

Encroachments

Suppose a neighbor is unclear about a property line and places a fence a foot into another’s property.  That’s an encroachment.  It will be noted in surveys and title insurance policies until removed.  This can even apply to old fences that no longer stand.  If a surveyor sees an old downed fence line, it will be drawn and noted in the survey.  It will be noted as an exception in the title insurance policy and could be noted as an encroachment.
On the subject of Exceptions in the title policy, and old road track through the property that originates off the property will also be drawn and noted by the surveyor.  It will be an exception from title insurance coverage as well.  The title insurer doesn’t want a claim to come from an adjoining property owner saying the road is one they use to access another part of their property.
The point is to be aware of all of these possible encumbrances and read all inspection, survey and disclosure documents to catch things like these.

How do rent to own contracts work?

The changes to the mortgage rules announced by Finance Minister Jim Flaherty last July are making it more difficult for first time buyers to get approved for a mortgage. Other buyers may have good credit but not enough of a down payment. At the same time, landlords are looking for good tenants to rent their units. Rent-to-own may provide a win-win for both owners and tenants.

Here’s how it works:

A landlord rents the home or condominium under a basic home lease. For an extra payment, the tenant receives an option to buy the home at a later date, for a set price. Let’s say the home is worth $250,000. The parties agree the tenant will have the right, but not the obligation, to buy the house in three years for $280,000.

The fee for this right, or option, is usually 2 or 2 ½ per cent of the final price. In this example, 2 percent of $280,000 would be $5,600. Then, each month, the tenant pays an extra fee, say $200, that also is applied to this option price. At the end of the three-year lease term, the tenant has put up close to 5 per cent towards the purchase price option. In this example, it would be close to $13,000.

If the tenant exercises their right to buy, they can use the $13,000 as the down payment and apply for a mortgage to finance the rest of the purchase.

Here are some of the advantages for the tenant:

•You may not have the down payment now, but you will have it at the end of your lease, as a result of the additional payments;

•If your credit is not good, you can improve it by making timely payments of rent;

•You can try out the neighbourhood and if you change your mind later, you can just cancel the option;

•If the market price of this home is more than $280,000 at the end of your lease, you still get to buy it for the same $280,000.

Should I talk to a bank before I look for a house?

The answer to the question is YES!  There are tons of reasons why you should talk with a bank and get pre-approved before looking at homes.  First and foremost, talking with a bank before looking at homes can help you understand exactly how much you can afford.  There is no reason to look at homes that are listed for $250,000 if you can only afford up to $200,000.

If you’re a first time home buyer, talking with a bank before looking at homes is strongly suggested, as there are many first time home buyer programs available.  These programs can vary from state to state and county to county, so knowing exactly what’s available to you, is critical.

Another important reason to talk with a bank before looking at homes is so you understand exactly what costs are associated with buying a home.  There are many home buyers who don’t understand the difference between a down payment, pre-paid items, and escrows, which can be thoroughly explained by a mortgage professional.  A mortgage professional can give you advice on the type of financing you should be looking to obtain and also whether or not you should request the seller to contribute towards your closing costs, also known as a seller’s concession.

Should I buy or continue to rent?

Buying a home can be a very solid investment.  This being said, renting can also be a better option for some, depending on the circumstances.  The current interest rates are incredible.  A 30-year FHA mortgage can be locked in at a rate of around 3.5%.  Since the interest rates are so low, it actually can be cheaper to pay a mortgage right now than paying rent.

There are questions that you should ask yourself before deciding to buy a home.  One of the most important things to consider is the length you plan on staying in a home, if you were to purchase.  If the answer is only a few years, it’s likely the better decision is to continue renting.  Another question to ask yourself is whether you are ready to take on the additional “responsibilities” of owning a home.  When owning a home there will be general home maintenance that should be done, are you ready for that?

Buying a home is a great option in many cases, but not always.

Can I find a rent-to-own property?

Can you find a needle in a haystack?  Of course you can, but the probability isn’t very high.  The same can be said about a rent-to-own property.  A common question from home buyers is whether rent-to-owns exist or whether an owner would consider that option.  They are out there, but there are somethings that you need to know before agreeing to a rent-to-own.

When an owner is offering “rent-to-own” as a possible financing option, they are taking on a high risk since in most cases, a rent-to-own buyer has a credit score that is not impeccable.  Since an owner is taking a higher risk the terms for a rent-to-own must be considerably favorable for the owner.  This often leads to less than favorable terms for a buyer.  When looking at a rent-to-own as an option you can expect to provide a considerable amount of money down and a higher interest rate than what a lender is currently offering.

If you’re able to purchase a home by financing through a bank or lender, you will be better off because the terms will be more favorable.

What is a short sale?

Before getting involved with a short-sale, it’s important you understand exactly what it is and what to expect from a short sale.  The easiest way to understand a short sale is the sale of a home in which the proceeds from the sale are less than the balance of debts secured by liens against the property and the home owner cannot afford to pay the liens in full.

Before purchasing a short sale, you should consider things such as the time it can take for a short sale response, the fact that a foreclosure is still possible, and that many short sale properties are in disarray.  Short sales are not impossible to buy but you must be patient and be in no immediate rush to move.

Do I really need a Realtor when buying a home?

When buying a home, it’s strongly recommended you have a Realtor.  There are many reasons why you should have a Realtor represent your best interests when buying a home.  Keep in mind, all Realtors are not the same!  When choosing a buyers agent, make sure you know how to properly interview prospective Realtors when buying a home.

Attempting to buy a home without a Realtor can really make the home buying process more difficult.  Having a Realtor is always recommended when buying a home.  One thing not to do when buying a home is calling the listing agent because you don’t want to “bother” your Realtor.  This is one thing that real estate agents hate.

Questions Asked Before Placing A Purchase Offer

How is the neighbourhood/area?

When buying a home, a common question home buyers have is regarding the neighbourhood/area.  As a real estate professional, there are rules against steering and providing personal insight into specific areas and neighbourhoods.  This doesn’t mean that your Realtor cannot provide you with tips to help you choose the right neighbourhood when buying a home.  Many buyers wonder about the growth of the local economy, crime statistics, taxes, and local amenities.  If you have a top Realtor when buying a home, you should be able to receive all of the pertinent information to allow you to make an educated decision on areas and neighbourhoods.

What is a foreclosure?

Believe it or not, foreclosures can actually be a smoother transaction than a short sale.  A foreclosure, sometimes referred to as a REO, is a property that is owned by a lender.  If you’re considering the purchase of a foreclosure, it’s important to understand that most are sold “as-is.”  Foreclosures, if not purchased by an owner occupant, are often purchased by investors, fixed up, “flipped,” and sold to a owner occupant.

How are the schools?

This is another question that Realtors should tread very lightly with.  There is no doubt that schools impact property values.  Just like tips for selecting a neighbourhoods, a top Realtor should be able to provide you with names or websites where you can find information on the local schools so that you can determine whether or not the schools are acceptable to you or not.

What are the average utility bills?

When buying a home, it’s important to know what additional costs will be in addition to the monthly mortgage payment.  Utility bills are just one of the additional costs to consider when buying a home.  Utility bills can be obtained from the home owner and in some cases, from the local utility company, who can provide averages over the past 12 months.  Keep in mind, everyone prefers to have their home temperature different, so the average bill could be different if you were to purchase the home.

What’s the age of the ____?

When looking at homes, many buyers want to know the ages of specific items in a home.  The most popular items in a home that buyers want to know about are the major mechanical items, such as the roof, furnace, water heater, and air conditioning (if applicable).  An experienced Realtor should be able to find the dates of a furnace, water heater, and air conditioning unit by looking at the serial numbers.  The roof age is often known by the home owner.  If not, the age usually can be approximately determined by looking at the roof characteristics, such as the sagging areas and the way the shingles are laying.

How many homes should I look at before putting in a purchase offer?

This question is often asked and is a simple answer.  The answer is, there is no specific number of homes you should look at before buying a home.  Don’t feel that if you were to purchase the first home you look at that you’re making a mistake.  Same can be said if it takes you looking at 25 homes.

Questions Asked While Placing A Purchase Offer

How much should I offer the sellers?

When buying a home, you are the only one who can determine how much you should offer a seller.  Certainly it’s suggested you ask for your Realtors advice and thoughts, but ultimately you are the only person who can determine how much you should offer.

What is an earnest money deposit?

An earnest money deposit is also frequently referred to as a good faith deposit.  When a buyer purchases a home, they provide the seller’s real estate company a deposit to hold in their escrow account.  The primary purpose of this deposit is to show a seller you are serious about purchasing their home.  The amount that is deposited is subtracted from the final figure that a buyer pays at the closing table.  In most cases, the larger the deposit, the stronger a purchase offer looks to a seller.

How long does the seller have to respond to my offer?

There is not a standard answer to this question.  A purchase offer will have a “life.”  The “life of the offer” can vary from 12 hours to 3 or 4 days.  There are many circumstances that can effect the length of the “life of the offer.”  Your Realtor should know how long of a “life” to give to your offer.  If you’re looking to purchase a home that is newly listed and the possibility of multiple offers exists, a shorter life is recommended.  If the home you’re looking to purchase has been on the market for 3 months and the seller is located out of town, a 2 day “life” maybe necessary and/or recommended.

What if my offer is rejected?

When a purchase offer is submitted to the seller there are generally four possible responses.  The first is an accepted offer, the second is a counter offer, the third is a rejected offer, and the final is an offer that is not responded to.  If your offer is rejected, meaning the seller says no and doesn’t counter, you have the right to place another offer.  It’s not very common an offer is rejected or not responded to, unless a seller is offended by a low-ball offer.

Do I have the option to have any inspections?

When buying a home, you have the option to perform several types of inspections.  The purchase offer you write can be contingent upon a satisfactory home inspection, pest inspection, chimney inspection, radon test, and many other inspections.  In most cases, it’s recommended that when buying a home, you at the bare minimum have a home inspection.  There are home inspection findings that are more common than others, however, no two homes are the same so it’s a great idea to get the home inspected.

Questions Asked After A Purchase Offer Is Accepted

What are the next steps?

Congratulations!  Your offer was accepted, now what?  Between contract acceptance and the closing date, there are many things that need to be completed.  In a nutshell, after an offer is accepted, generally any inspections will be completed.  After the inspections, you complete a formal mortgage application and last but not least, the title, abstract, survey, and any miscellaneous paperwork is completed.  When buying a home, finding the perfect home is only one part of actually becoming a homeowner.  Throughout the mortgage process, you should expect the bank to require documentation, letters, and other items from you to satisfy the bank conditions, so don’t be upset or surprised when this happens.

Do I need to do a final walk-through?

As a buyer, you have the option to perform a final walk-through.  Is a final walk through a requirement?   NO.  Is a final walk through necessary?  YES.  Generally when buying a home several weeks go by between when you last walked through your home.  Lots of things can change during that time.  When doing a final walk through a few things you should check is that furnace is working, the toilets are flushing properly, and there is hot water.

When is the closing date?

When buying a home, the excitement level is extremely high.  It’s important to understand that the closing date in the purchase offer is a target and not a guarantee.  Before you hire the movers and take time off from work, know that the closing date in the contract isn’t necessarily the date you will own your new home.  Many buyers will ask their Realtor this question, however, it isn’t up to the Realtors when a closing will be.  The attorney’s are the ones who have to set the closing date and time.

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