Whether you’re buying your first home or are no stranger to real estate, there are few sweeter phone calls than hearing that your offer to purchase a property was accepted. Particularly in the last few years with a hot housing market, competition between buyers for properties has become fierce, and willing bidders are looking to put forth a lot of cash in order to get those keys.
But what happens after your real estate offer is accepted?
There are a series of steps that you’ll need to follow to ensure your real estate purchase is completed. Some happen within the first hours after confirming your offer, and some happen right before you take possession, but all are important to ensuring that your real estate transaction goes off without a hitch.
While your realtor can provide you with a comprehensive checklist, we have covered off some of the basics below. A real estate lawyer is an important part of your transaction, and we feel that it’s important you know what steps you need to take to help make sure that the closing runs smoothly.
First, pay your deposit
A small portion of your agreed-upon purchase price is a deposit that will need to be paid to the seller’s brokerage right away – usually within 24 hours. While the amount represents only a small portion of your overall purchase price (usually 5% or more), it is still a significant amount of money – possibly $30,000, $40,000, or even $50,000 or greater.
The deposit should be paid through a certified cheque, bank draft, or wire transfer – all of which you can obtain from your bank branch – and is paid to the brokerage where it is held in trust. If your offer had no conditions, and you later decide to pull out of the transaction, you will run the risk of losing your deposit.
Next, follow through on your conditions
In a hot real estate market, it may be necessary to put in a ‘clean offer,’ or an offer with no conditions. This means that you are purchasing the property “as is”, without any home inspection, and that you are guaranteeing that you will have the full funds available at the time of closing.
However, many buyers will opt to make their offer conditional on the results of a home inspection, so that they can have a professional see what they may not recognize with the naked eye. Is the roof in serious need of repair? Is that stucco ceiling actually asbestos? Are those cracks in the foundation a sign of serious trouble? The inspection should happen within days of your offer being accepted so that the seller has a chance to re-list the property if you decide not to move forward.
Meet with your mortgage provider
Unless you have all the cash on hand, odds are that you’ll be purchasing your property with the assistance of a mortgage. Even if you’re putting down a significant amount of money out of savings, there may still be a gap of hundreds of thousands of dollars that your mortgage can help cover.
Prior to making an offer or purchasing your property, it’s important to have a ‘pre-approval’ – an authorization from your lender that confirms just how much you’ll be able to borrow and at what rate. Once you make your purchase though, your lender (either a bank representative, or mortgage broker or professional) can go through with you the exact terms of your mortgage – what you’ve agreed to borrow, and how and when you must pay that amount back.
Iron out those final costs
Many first-time home buyers believe that the purchase price of their home is the final price involved, and thus will stretch their budget as much as possible to make those numbers work. Unfortunately, there are several other costs that go into purchasing a home, and some of them are fairly significant. Here are just a few:
- Land Transfer Tax – Ontario charges an additional land transfer tax that can be between 0.5% and 2% of the home’s value (although you may be eligible for a tax rebate to lessen this burden), and the City of Toronto charges a further municipal land transfer tax on properties within its borders.
- Title Insurance – Title insurance is meant to protect your home from fraud, so that no one can wrongfully claim that they own the house and not you. The cost of title insurance will depend on the purchase price of the property and other factors related to the property and the transaction.
- Builder’s Costs – If you are buying a newly constructed property, you’ll need to monitor carefully what’s included and what’s not. Every upgrade, from better appliances to better showerheads and better door trim will have an associated final cost.
- Insurance – Your lender will require you to carry certain insurance such as home insurance and fire insurance, and if you are paying down less than 20% of the purchase price then you will need to insure your mortgage payments as well.
- Moving Costs – If you’re over 25, it can be harder to move with 2 friends and a minivan. Hiring professionals makes the job go much faster, but between truck rentals, labour, packing and other costs you may be looking at an additional $500 or more.
Most importantly – consult with your real estate lawyer!
While it’s good to have a real estate lawyer in your corner before putting in your offer, they’re a crucial part of the transaction once your offer is accepted. You’re signing what is likely to be the biggest and most important contract of your life, and your real estate lawyer’s job is to help you review your agreement of purchase and sale.
A real estate lawyer’s primary role is to review the details of your Agreement of Purchase and Sale with you, so that you understand exactly what is required. They’ll also review the terms of your mortgage, and make sure that you understand everything clearly. When you do close on your property, those funds go to the seller’s lawyer in trust, and are then turned over to the seller once everything clears. Your lawyer will also be responsible for placing your name on title.
Real estate lawyers play another crucial role that is often overlooked. While most transactions close smoothly and without incident, this isn’t always the case. If something goes wrong at the last minute, such as a delay in funding or something else that can threaten the transaction, your real estate lawyer is on your side. They’ll work to sort out any serious issues and provide you with advice on your rights and obligations. .
At Pavey Law our real estate lawyers advise on all sides of real estate transactions, from helping buyers and sellers with single home purchases to acting for large-scale construction projects and helping with commercial leases. We know the real estate market well in Cambridge, Kitchener, and Waterloo, and we are here to help whenever you’re ready. Contact our office today to set up a consultation.