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I am a first time house
buyer; what do I need to know before I sign an offer to purchase? |
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It is important
to appreciate that an offer to purchase is a contract. Once you have signed it
you will be bound by the terms. It is a good idea to consult a lawyer before
you sign the contract and not after. You should be sure to obtain as much
information about the property you want to buy before you sign any offers to
purchase. You should be sure to get the following information:
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Check the amount of
the yearly property taxes and if there are any tax arrears. |
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Check any
restrictions on the title to the property. |
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Consider having a
building inspector look over the property for structural problems and prepare a
written report for you. |
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Check with your
banker and make sure that you will be eligible for the amount of mortgage
financing you will need. |
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Can I put conditions on
the offer to purchase? |
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Yes, you may
make your offer to purchase conditional on many things. Some of the most common
conditions are:
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Obtaining a
favourable building inspection report; |
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Obtaining suitable
financing from your bank; |
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Obtaining your
lawyer's approval of the terms in the offer; and |
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Selling your present
home if you have one. |
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Do I need a lawyer to help
me buy a home? |
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| It would be an
excellent idea. Particularly if you have never purchased property before, there
are many things that need to be looked at. For example, your lawyer will order
a copy of the title to the property and check it for restrictions on the title,
such as easements, restrictive covenants, and encumbrances such as mortgages,
builder's liens and other items. Any one of these things on the title to your
property could have very serious consequences for your future use and enjoyment
of the property. Without expert guidance, you could find yourself in serious
difficulty down the road. |
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That answer raises more
questions; what is an easement, a restrictive covenant and an encumbrance? |
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An easement is
the right or privilege given to someone [or a corporation] to a limited use of
lands that belong to someone else. A very common example of an easement is the
right of way for water and sanitary and storm sewer lines.
A
restrictive covenant is a contract which gives one owner of land the right to
restrict another owner of land from using his or her land in a certain way that
might be detrimental to the saleable value of the first owner. Restrictive
covenants are always negative; that is, they are meant to prevent something
from happening. For example, a land developer will often file a restrictive
covenant on a parcel of land being developed for single family homes, stating
that the land must be used for private residential purposes only and that no
attached or semi-detached homes, duplexes, apartments or any house designed for
more than one family can be built on the lands.
An encumbrance is a
general term meaning some sort of charge upon the land and may include
restrictive covenants and easements, as well as many other items.
Because there are so many things like these that may appear on the title to
the property you wish to buy, you really should use a lawyer to advise and help
you. |
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How much will a lawyer
cost me to buy a house? |
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The cost will
vary from lawyer to lawyer and you should obtain several quotes. It will also
depend on the value of the property you are buying and any special
circumstances that might require additional time and attention. Note that the
Professional Code of Conduct for the legal profession stipulates that, within a
reasonable time of beginning representation of a client, a lawyer must provide
in writing as much information about fees and disbursements [out-of-pocket
expenses] as is reasonable and practical in the circumstances, including the
basis on which fees will be determined.
There are some costs involved
in purchasing a house over and above lawyer fees [usually called
disbursements]. For example the Real Property Report and a Compliance
Certificate will usually exceed the lawyers fees, and it is important to obtain
an estimate of these costs, in order to budget. |
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What other costs are
associated with buying a house? |
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You should
expect the following expenses on top of your legal fees:
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The cost of a
building inspector's report if you hire one |
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An adjustment for
taxes - For example, if you take over the property on September 1 and the
previous owner has paid the taxes for the full year, you will have to pay back
the balance of the taxes from September to December of that year. |
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Fire insurance |
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Appraisal fees if
your bank or mortgage company asks for one |
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GST if the home is a
new one - Usually there is no GST paid on previously owned property. |
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Registration fees at
the Land Titles Office |
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Fees payable for
obtaining a new mortgage |
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Fees payable for a
Real Property Report |
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Interest charges if
there is a delay between getting your mortgage advance from your lender and
paying the seller in full - Delays like this often occur because it takes time
to register documents at the Land Titles Office and get the title in your name,
and you must have the title in your name before your lender will advance funds.
The delay is usually not more than a few days. |
Keep in mind that you will also have moving
expenses and charges for such things as arranging phone lines and utilities
accounts. |
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Who is responsible for the
real estate agent's commission? |
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| The listing
agreement is a contract between the seller and the real estate agent. The
seller is responsible for the payment of the commission unless expressly stated
otherwise. |
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What does an offer to
purchase usually include? |
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Most offers to
purchase are contained in a standard form prepared by the local real estate
board. At a minimum, these forms will cover the following information:
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The parties; that is,
the names of the vendor [seller] and purchaser [buyer] |
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The legal and
municipal title of the property |
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The purchase price,
including the deposit and information about whether an existing mortgage on the
property will be taken over by the purchaser, or whether the purchaser will
obtain a new mortgage; and the payment of the outstanding balance between the
deposit, the mortgage funding and the total price |
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Interest on any
outstanding balances |
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Conditions [subject
to's], such as the right to have the agreement looked at by the parties'
lawyers, obtaining financing, satisfactory building inspection, etc. |
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Any items that are to
be included in the purchase price such as drapes, appliances, rugs, mirrors,
etc. |
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Any information about
the state of repair of the property or warranties about land use, and bylaws
or, as the case may be, a statement that no warranties about the property are
made |
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Time requirements,
such as the amount of time the vendor will have to accept the offer; for the
transfer of actual possession; and the date for adjustments to such things as
the municipal tax account |
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Insurance
requirements - Who is responsible for insuring the property, for what time
periods and for how much? |
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Information about how
to deal with default if one of the parties tries to back out of the deal |
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Payment of the real
estate commission |
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Payment of GST and
other taxes |
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Places for the
signatures of the vendor and purchaser, their witnesses and the real estate
agent |
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What are the options for
how my spouse and I to register ownership of our new home? |
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Most couples in
British Columbia choose to register the title to their homes as "joint
tenants". Joint tenants own the whole property together. If one joint tenant
dies, the other automatically inherits the whole property. One joint tenant
cannot leave the property to anyone else in a will.
The other, less
common way of holding title to land when there is more than one person is by
"tenants in common". Each tenant in common separately owns an equal interest in
the property with equal rights to occupy the whole of the land. A tenant in
common can dispose of his or her own interest in the land by selling it or
leaving it to someone in a will.
Of course, it is always possible to
register title to your home in your name alone or in the name of your spouse.
While you may have good reasons for doing this, it should be thoroughly
discussed with your spouse and your lawyer before you take this route.
If the home is your matrimonial home, the spouse who is not named on title
will still have something called "dower rights". |
