BY: JAY BRIJPAUL
A home purchase is one of the biggest decisions you will ever make. It involves hundreds of thousands of dollars and one decision can be financially fatal.
Start by choosing the right realtor to represent you. Having a real estate license is not the same as having the knowledge or the experience to help you. Ask family and friends for recommendations. Interview two or three realtors before deciding and look at their track records. An experienced realtor, like an experienced sailor, can navigate you across the shark-infested waters of real estate and take you safely ashore. Many buyers believe that if they choose the realtor who represents the seller, they can negotiate a better deal. This is far from the truth. Would you consider going to a lawyer whose client is suing you, to represent you?
Your realtor will ask you to sign a buyer contract. The contract is valid for a period of time and states how the realtor will be compensated. A buyer contract is for two to three months and usually, the realtor is paid by the seller’s brokerage. Always read the contract before signing and ask the realtor for a copy.
Your realtor will arrange for you to be prequalified to buy. With the help of a mortgage broker, you will know how much the bank will lend. Let’s assume that you qualify for a mortgage of $500,000. Ask the broker to work backward, with the assumption that you bought a home for five hundred thousand dollars and estimate your monthly payments including mortgage, property taxes, insurance, and utilities. It the payments are high, ask the realtor to rework the figure based on a lower mortgage amount.
In addition to your down payment, you will need to account for closing costs. Approximate costs include home inspection fees, $400, appraisal fees, $350, land transfer tax, about 1% of the purchase price and for buyers who are buying in the 416-area code and are not first-time buyers, 2%. In addition to that, consider lawyer’s fees and the cost of title insurance and disbursements. If your down payment is less than 20%, then you will have to pay CMHC insurance fees which can be substantial, but the lender will include that amount in your mortgage. However, the HST on the CMHC fees is out of pocket expenses. Put away about 1.5% of the purchase price for closing fees.
Your realtor will arrange to view homes with you. Choose homes based on the location, then the size and the amenities. Always buy what is easy to sell. If you are considering a home with maintenance fees, then calculate how much mortgage money the fees can pay. You might be able to step up to a freehold and your monthly expense will be the same. Homes with registered basement apartments are good choices because the projected income from the basement will help you qualify for more mortgage. In addition, the extra income will come in handy and when you are ready to sell, buyers will pay you more because of the advantages.
Before purchase, consider whether the home has major defects. Ask your realtor if the seller has a Seller Property Information Statement. This is a disclosure statement that the sellers may have provided to the realtor. You can also request a history report that will provide information if the home ever had an insurance claim for fire, flood, sewage back-up or was used as a grow-op from homevarified.com.
The French Novelist, Marcel Proust, said that “the real voyage of discovery consists not in seeking new lands but in seeking them with different eyes.” Toronto is a mega city and there will be a demand for homes. What seems expensive today will look like a bargain soon. Home values in mature neighborhoods, on large lots, will climb.