The Worlds Greatest First Time Buyers’ Guide…Period.
Ready to take the first step on to the Property Ladder but have no friggin clue where to begin? Well, here’s the Worlds most comprehensive guide to buying a home in Toronto!
Step 1 – Connect with the right Pros
Finding a Realtor – Would love to tell you to go out there and do your research but if you’re reading this post, you’ve already found the right group of Realtors to help you. If you’re looking at a purchase in Toronto, one of our Team Members can most definitely assist you. I’m sure your cousin Joe is an awesome Realtor out in Peterborough but he’s not the one to help you here. Whatever you do, make sure you’re working with someone who knows your target neighbourhood. If you meet a Realtor who says they “specialize” in all of the GTA…turn around and RUN! It’s impossible to know everything about everywhere.
Connect with a Mortgage Broker - Over the years we’ve had clients use Mortgage Brokers, The Big Banks, the bank of Mom and Dad etc… but on average we’ve found that an unbiased Mortgage Broker has consistently delivered the best products for our clients. We work quite closely with our favourite money man, Lee Welbanks @ Welbanks Financial Group. He’s got a solid team of pros to help you navigate the complicated mortgage system. Brokers go out there and find you the best available deal from the Big Banks, Credit Unions, or Private Lenders. They’re usually able to get you the best rate. Once you have a discussion with us, give Lee a call to sort out your numbers.
Contact a Real Estate Lawyer - A Real Estate Lawyer does most of his/her work on closing day and a few weeks leading up to it. We love the team at Feld Kalia LLP. They’re tech savvy, on the cutting edge of industry trends, and super easy to work with. Need something after 5pm? Good luck reaching other lawyers! These guys are truly on the ball and have shown nothing but class since the 1st day we met them. Just give them a heads up that you’ll be making a purchase and we’ll deal with coordinating with them once we have decided on a purchase.
Armed with the right Pros? Great! Let’s get this party started!!!
Step 2: How much – What – Where
Budget - Once you’ve met with the Mortgage Broker you’ll likely have an idea of what you’d get approved for. They can usually get you a pre-approval within 48 hours. Aside from the mortgage amount, you will have to come up with a minimum of 5% as a down payment PLUS closing costs. If you’re looking at a property over $1 million you’ll need 20% thanks to the B-20 Mortgage Changes Example: if you’re buying a $400,000 property you’d need between $25,000-30,000 saved up. That’s $20K as a down payment plus an additional 5-10K for closing costs depending on your situation. Many people think that as a first time buyer you’re completely exempt from paying Land Transfer Tax, sorry to burst your bubble but that’s not the case. Read our post about Land Transfer Tax to understand how much you may end up paying (oh, and we have the worlds best buying/selling spreadsheet that outlines all of this for you so contact us to get your copy)
Property Type – Your budget will likely have made this decision for you but if you’re still not sure we need to have a sit down and have a discussion. Do you want to be close to work? Close to the nightlife? Close to friends or family? There are many things to talk about here and with our help, we’ll narrow down a property type that fits with your budget and your lifestyle.
Property Search – We’ve built a powerful search tool that gives you so much more valuable information than the traditional MLS system. You’ve certainly been cruising the MLS looking for your dream home but it’s time you took your search to the next level. Go to the Spring Realty Custom Homefinder, login and enjoy! This isn’t some sales pitch to keep you on our site. While searching on MLS you cannot see how long a property has been on the market (DOM), we have that. Has there been a price reduction? We have that, MLS doesn’t. Property taxes? We have that, MLS doesn’t. We’ve also spent hundreds of hours compiling neighbourhood information, school info, transit info, and local hot spots (this is always a work in progress so if we’ve missed something, tell us!). When you are searching for a home on our site you get the whole picture. Of course our ear is always to the ground so if we hear of a property about to hit the market in your target neighbourhood(s) you’ll hear from us. We’ll also put you on our property match email service where you’ll receive a daily email with that day’s newest listings.
Showings and Open Houses – We could find the right property on day 1 or day 200. However long it takes, we’re in it for the long haul.The Property Search phase is ongoing and as we progress through the process and refine our search we’ll be able to narrow down some potential homes to view. Showings happen whenever you’re available. As long as a property is available to show, we’ll get you in, day or night, weekday or weekend. If you’re tech savvy, you’ll be given a tablet to use (either iPad, BB, or android device whatever you’re more comfortable with). You can take photos, take notes, and even record video to review when you get home. Who knows, if you’re good, we may even let you keep the tablet once you buy! Don’t forget to wear shoes that are easy to slip on and off as you’ll likely need to remove your shoes a dozen times a day. To save on time and gas, you’ll likely travel with your agent from house to house then be dropped off back at your vehicle unless you’d prefer to drive, it’s up to you. Most of the time the resident leaves the property during the viewing time but on occasion we’ll run into the homeowner or tenant. As uncomfortable as it may be, you’re there to buy so don’t be afraid to open closets etc… just pretend they’re not there. We sometimes like it when we meet the homeowner, they may slip up and tell us more than we should know. Hey, information is power right?
Step 3: Offer – Closing Date – Deposit – Conditions
Making an Offer – This is the part that separates the men from the boys, the Women from the girls. Time to put your money where your mouth is! We may be offering on the 1st place you’ve seen or the 100th. It’s not uncommon to find the “winner” on Day 1 so we may get to this step fairly quickly. Before we get into talking offer, let’s quickly go over what you need to do once your offer is accepted and important condition that are usually included in offers and what they mean.
Closing Date: Also known as “Possession Date” this is when you actually take ownership of the property all the mortgage money is transferred through the Lawyers and you get the keys! Here are a few things to consider when setting this date in the offer. As a first time buyer you’re likely going from a rental to the home. You’re required by law to give your Landlord 60 days notice to vacate. Now this 60 days begins on the 1st day of the month following your notice. For example if you give notice on December 14th, the 60 days begins on January 1st. Keep that in mind when setting the closing date on the offer. Are you planning on renovating the property? Perhaps you’ll need to stay in your current place while the renovations are happening. All of these things can be discussed while preparing the offer.
Deposit : Once your offer is accepted, you need to provide a cheque or money order to be held in trust by the Listing Brokerage. This is usually 3-5% of the purchase price but could be more or less depending on the situation. This is cash that you need to have available so when we start looking for properties, free up some funds so we can prepare a deposit fairly quickly. When in a multiple offer situation, it can be an advantage to have the cheque with the offer. We’ll discuss what happens to this money if the deal falls through below.
Conditions – These are the top 3 that are important to know. There are others, of course but those can be discussed as needed.
- Financing - This condition gives the buyer(s) 5 business days after the offer has been accepted to confirm their financing. If for whatever reason, the bank refuses to fund the purchase you have an escape clause and your deposit money will be returned to you without deduction.
- Home Inspection – This condition also gives you 5 business days (usually) to hire a home inspector (we have a great guy by the way), conduct a home inspection, and satisfy yourselves of the inspection report once delivered to you. Our favourite Home Inspector and owner of Red Brick Inspections is Bob Papadopoulos. He’s fantastic with first time buyers. If the report reveals any deficiencies that you are not willing to deal with we can ask the Seller to either remedy the deficiency or ask them for a price reduction. If you’re not happy with their response, you can walk away from the deal and get your deposit money back without deduction.
- Status Certificate – This is for condos only. The status certificate will give you a picture of how financially healthy a condo corporation is prior to committing to a purchase. Also highlights potential restrictions (like pet, specific use) in the by-laws they may not work with your situation. The condition allows the condo corporation 10 business days to deliver the certificate and then usually gives the buyer an additional 2 days for the lawyer to review and approve (or not approve). If you’re not happy with the contents of the status certificate after your lawyer has explained it to you you have the option to walk away from the deal and have your deposit money returned without deduction.
NEVER remove an Inspection condition without actually conducting an inspection or reviewing an existing one. NEVER remove a status certificate condition without actually reviewing one, NEVER remove a Financing condition without actually getting the go ahead from the mortgage broker.
The Offer – Once we find the right property your Spring Realty Agent will dig deep to find all of the available information to determine our offer price, required conditions, deposit amount, market value…everything! Sometimes making an offer isn’t as simple as it sounds. Here are a couple situations we may find ourselves in:
- Multiple Offers aka Bidding Wars: Meaning, you’re competing with other Buyers for the same property. Usually in a hot housing market the Seller will set a date to look at offers. The goal is to be able to market the property for a full week so everyone can see it and do their due diligence. Then, on a specific date and time they ask potential buyers to submit their offers. This is when you usually see properties sell for “over asking” (assuming there were multiple bids). Don’t get freaked out by offering over asking, it’s really a meaningless term when the initial asking price was below market value anyway. When you compare your offer to market value (which we’ve already determined), the answer is much less dramatic. Important to remember that just because there is an offer date doesn’t mean that we’ll be in a multiple offer situation. Sometimes setting an offer date, also known as “holding back offers” does not work and there’s only one interested buyer at the offer table. The Seller can choose to pull the property off the market if they don’t get the price they were hoping for or they’ll be open for negotiation and hopefully come to an agreement with you! Prior to making an offer, we’ll ensure that there are recent comparables that justify our “over asking” offer. During the week before the offer date we’ll make sure to confirm financing with the mortgage broker and conduct our own home inspection or review the existing home inspection so we can make our offer without any conditions. Those conditions mentioned above can be satisfied before making the offer too. Bringing an offer without those “escape clauses” strengthens our position big time. Remember, we’d NEVER suggest you omit a condition without actually confirming financing or reviewing a home inspection. Multiple offers don’t just happen when Holding Back Offers, we’ve seen properties on the market for 70 days without an offer then all of a sudden there are two. Don’t panic, this happens and we’ll be ready for it. We’ll analyze the market and come up with the best offer price we can.
- Regular Offer: This is the ideal situation here. No competition, more room to negotiate, and you can satisfy your conditions after you have an offer accepted. There are a couple of things to consider though:
- If we have a property that is accepting offers anytime but is new to the market, they will not likely be too flexible (always exceptions to the rule though) on price so if you’re making an offer on a place in its early listing days be prepared to end up very close to asking price. Assuming the property is properly priced of course.
- Typically when not competing with other Buyers it is acceptable to have an offer with conditions in it. The most common ones for a house are the Home Inspection condition, the Financing Condition, sometimes you would include conditions that speak to the legality of apartments, legality of parking pads, present use, and if the subject property is a condo the mandatory condition is the Status Certificate.
Step 4: Closing Day!
Most closings happen after 3pm so be prepared for that final visit to the Lawyers office with your down payment in small, unmarked bills in a metal briefcase. Or bring a certified cheque, whatever tickles your fancy. You’ll be contacted by the Lawyers a week or so before to prepare you for this day, sign final documents, and break down the final costs of wrapping up the purchase. Remember that deposit you gave with the offer? That amount is now transferred from the Real Estate Brokerage to the Lawyers to be used as part (or all in some cases) of your down payment. Once confirmation of the transfer is received, the lawyer gives you the keys and you get to walk through your very own front door! The Seller will usually leave the property in broom swept condition but be prepared for some unexpected surprises. They may have left behind some “stuff” or taken that light fixture you wanted. Whatever the situation, contact your Realtor to help deal with these things.