Home Buyer's Guide

Congratulations! You’ve decided to buy a home.

Maybe this is your first home, maybe you have a growing family and are moving into something bigger, or maybe you’re about to retire and become an empty-nester. Regardless of your stage in life, buying a home is a significant financial commitment. This Guide will help you get ready for every step of the home-buying process

Source: The Real Estate Council of Alberta (RECA) Home Buyer's Guide

 

 

Getting Ready to Buy

Do Your Homework

Before you start home shopping, there’s a lot to consider:

Are you ready to buy? Are you prepared to maintain a property or do you prefer to have a landlord make repairs? Have you considered the additional home ownership costs (property taxes, utilities, insurance)?

Do you have stable employment? If you’re new in a job, or only on a contract, you may want to wait until you have a more stable job situation. The reality is, if you have unstable employment, it may be more difficult to get a mortgage. Likewise, if you’re self-employed, do you have the savings necessary to cover home ownership costs in the event your self-employment encounters tough times.

What type of housing do you want?

► New vs. Resale: Besides the obvious differences in new construction homes versus resale, buyers need to know that GST applies to the purchase of a newly constructed home. New homes are usually covered by a warranty from one of Alberta’s seven new home warranty providers. On the other hand, GST does not apply to resale homes, but there is no new home warranty unless it is still covered from when it was first built.

► Attached vs. Detached: Detached homes are typically more expensive than attached homes, but they also provide you with some physical space between your home and your closest neighbour. Detached homes won’t share any walls with a neighbour, and that likely makes them quieter.

► Single-family vs. Condominium: This relates to the type of ownership, not the style of the home. Single-family homes do not have common property. As the owner, you own the entire structure plus the land it sits on. A condominium is a form of property ownership that includes the individual ownership of a unit and shared ownership of common property with other unit owners; the common property includes the land on which the condominiums sit.

  • An owner of a traditional condominium does not own the land on which their home sits nor do they own the structure of their home.
  • An owner of a bareland condominium owns the structure of their home, but not the land on which it sits; that land is common property.

Condominiums can be apartment-style, townhouse, attached, or detached. In a condominium, you pay a monthly fee to cover your share of expenses for the common property, and you have to follow the condominium’s rules (bylaws). When you own a condominium, the condominium board makes some decisions on behalf of all owners, such as maintenance, allowable exterior décor, and garden rules. Owning a condominium, though, also means the condominium corporation pays certain expenses, subject to the bylaws of the corporation (i.e. roofs, window replacements).

► Single-family with revenue: A single- family property with revenue potential is an option for a buyer who wants a single family home, but is concerned about costs. That revenue potential would most likely come from a basement suite. When considering such a property, keep in mind that you become a landlord, which means you will have to deal with finding tenants, additional property maintenance, and you will need to become familiar with relevant legislation (in Alberta it’s the Residential Tenancies Act). While such revenue can assist in the financial side of home ownership, it is not a decision you should take lightly. Remember also that different Alberta municipalities have varying rules surrounding suites, and just because you see a bedroom and a kitchen in the basement of a home, doesn’t mean you can legally rent it out.

 

 

Financial Readiness

Are you financially ready to buy a home? Get a sense of your current monthly expenses and think about the following:

Consider your down payment: A down payment is the part of the purchase price the buyer pays in cash rather than financing with a mortgage. Buyers typically need a minimum 5% of the purchase price as a down payment, though some lenders now have mortgage options that allow you to borrow your down payment, and/or a relative can provide you with a gift of a down payment. Other than any such gift funds, you must prove to the financial institution or lender that your down payment is from your own funds. Other than any gift funds, you must prove to the financial institution or lender that your down payment is from your own funds.

If your down payment is less than 20% of the purchase price, you need a high ratio mortgage and it has to be your primary residence (i.e. you can’t rent it out). Lenders require borrowers to obtain mortgage insurance for high ratio mortgage, since they can be riskier for financial institutions. Your mortgage insurance premium will vary depending on the size of your down payment relative to the price of the property, but ranges from under 1% of the purchase price to more than 3%. If your down payment is 20% of the purchase price or more, you do not require mortgage insurance.

Ensure you have deposit funds: You need to provide a deposit with your offer to purchase. Your deposit funds are typically part of your down payment.

Budget for closing costs: Closing costs are separate from your deposit and down payment, and are typically due on possession date, which is the date when the real estate transaction is complete and the property is yours. Closing costs include lawyer fees, property tax adjustments, title insurance (if any), etc. It is a good idea to budget a couple thousand dollars on top of the purchase price as closing costs.

Remember that being approved for a mortgage of a certain amount doesn’t mean you have to spend that much. In fact, many experts believe you shouldn’t max out on the value of your home. You want to leave enough room in your budget in case you have unplanned expenses come up, interest rates rise in the future, or if there’s going to be a period of time when you’re off of work (sickness, parental leave, etc.).

Get a sense of market conditions: News articles often refer to real estate market conditions.

  • buyer’s market – where property supply is strong and buyer demand is weak. In a buyer’s market, you’re more likely to hear that buyers think they received a good deal.
  • seller’s market – where buyer demand is strong and property supply is weak. A buyer in a seller’s market may worry they’re paying too much for a property because they’re competing with other buyers for a limited supply of properties.
  • balanced market – where demand from buyers is keeping pace with the supply of properties for sale.

Market conditions affect home prices. Sellers want to get as much for their property as they can and buyers want to pay as little as they can; the market conditions will dictate who has a stronger negotiating position.

 

 

Finding Professionals to Work With

If you believe you’re financially ready to buy a home, your likely next step is to find the professionals to assist you. In many cases, this will be a mortgage professional (a bank employee or a licensed mortgage broker) and a licensed real estate professional.

You want to find professionals you trust, who can answer your questions, help you secure financing, help you find a property, and help you successfully negotiate a purchase.

It’s important to find the professionals that will suit your needs. But how?

Word of mouth referrals
Get recommendations from your friends and neighbours about experiences they’ve had with mortgage brokers and real estate professionals.

Search online
The internet is your friend. Almost all mortgage brokers and real estate professionals have an online presence, whether it’s a personal website or profiles on various social media sites. Do some searching online and find someone that appeals to you.

Find out if they’re licensed
Mortgage brokers and real estate professionals need a licence to operate in Alberta. Do a public licence search on RECA’s website to make sure a professional’s licence is current. Visit www.reca.ca and click on “Searching for an industry professional.” Bank employees can assist in mortgage financing and do not require a licence through RECA, but mortgage brokers do. Either one can assist you with your mortgage needs.

Check the RECA website
RECA posts disciplinary decisions on its website. Check the Complaints & Discipline tab on the Consumer side of RECA’s website for two years of disciplinary history, to see if RECA disciplined the professional with whom you want to work.

Interview some options
While the above suggestions will help you find professionals to talk to, they won’t tell you exactly which professionals are right for you. Your next step should be to interview those you are considering. Make sure they have the experience, background, and knowledge necessary to assist you in your purchase or sale. You need to feel comfortable with your choice, so it’s a good idea to ask them for references and let them know you’re interviewing multiple professionals.

 

 

Working with a Mortgage Broker

Most buyers need at least some financing (a mortgage) to purchase a home. The two most common sources of a mortgage are directly through a bank or through a mortgage broker. Typically, banks only offer their own mortgage products while mortgage brokers can source mortgage products from different lenders.

Interview questions for a mortgage broker

  • are you a licensed mortgage broker?
  • do you represent the borrower, the lender or both?
  • do I need to sign a contract?
  • what services do you provide and how will you help me?
  • do you charge borrowers a fee?
  • how do you receive compensation for your services?
  • how many lenders do you work with?
  • was most of your business done through one lender last year?

It’s important that borrowers understand the relationship they have with their mortgage broker. Did you know that when you’re talking with a mortgage broker about applying for and getting a mortgage, that broker’s business model may be to represent the lender, not you?

A mortgage brokerage may:

  • represent the borrower (you);
  • represent the lender; or,
  • act as an intermediary.

Each relationship option comes with different roles and obligations. In all cases, though, mortgage brokers have a responsibility to clearly explain their role to borrowers they’re working with.

When they are representing you, the borrower
When a mortgage brokerage represents you, as a borrower, you are a CLIENT. They must act in your best interests at all times, and will owe you general, fiduciary, and regulatory obligations. These include undivided loyalty, confidentiality, full disclosure, obedience, reasonable care and skill, and full accounting. They will recommend financing options to you, advocate on your behalf, and provide you with confidential advice.

When they are representing the lender
When a mortgage brokerage is representing the lender as their client, they will be acting in the lender’s best interests at all times, not yours. They can still work with you; however, they will treat you as a customer.

When you are a customer, the mortgage brokerage must:

  • treat you honestly and act with reasonable care and skill
  • gather information on the property you want to finance and on your financial situation
  • explain the lender’s options to you
  • complete the necessary documents and submit them to the lender
  • tell you about the transaction’s progress and pass along any communications from the lender to you

The mortgage brokerage cannot give you advice or act in any way that would be a detriment to their client, which is the lender. The lender has their undivided loyalty.

When they are acting as an intermediary
A mortgage brokerage may act as an intermediary between you, as a borrower, and potential lenders. In this case, both you and the lender are customers of the mortgage brokerage.

The brokerage will facilitate the mortgage deal by gathering information, explaining the options, completing the necessary documents and keeping both sides apprised of the deal’s progress. They will not act to the benefit or detriment of you or the lender(s). Alberta mortgage brokerages often work as intermediaries when working with residential borrowers.

It is the mortgage brokerage’s decision

Each mortgage brokerage decides its own business model. Some only represent lenders, some only represent buyers, and some will represent neither. The brokerage should explain its model, and inform you of your options, including sending you to another brokerage, if you are not satisfied with the options they offer.

 

 

Understanding and Securing Financing

Mortgage Pre-qualification

Your mortgage broker has tools to help you in your home search. Before you go house shopping, you want to know how much of a mortgage your income will support, and what affect your current debt load will have on a possible mortgage amount. You can find this out by getting a mortgage prequalification.

  • A mortgage prequalification is tentative approval from a lender for a mortgage based on your qualifications (i.e. income, down payment amount) made in advance of a real estate purchase. The prequalification will provide you with the information needed to know how much of a mortgage you will likely be approved for; it’ll help you ensure you’re shopping for homes you can afford.

A prequalification is not the same as receiving approval for a mortgage; it is not a guarantee a lender will enter into a mortgage contract with you. Once you make an offer to buy a property, you will formally apply for a mortgage, and you will have to submit supporting documentation that confirms your financial position. A lender might choose not to approve you for a mortgage after it more closely assesses you and/or the property. While shopping for a home, try to maintain your financial situation. That means it’s not a good time to change employment or take on additional debt (vehicles, etc.).

After you choose either a bank financial specialist or a mortgage broker to work with, get your paperwork in order. You may need to have certain documents available when you seek a mortgage prequalification, and you will definitely need them when you apply for the mortgage – these include:

  • proof of employment (for example, a letter from your employer)
  • most recent Canada Revenue Agency Notice of Assessment
  • confirmation of income (for example, pay stubs or a T4)
  • gift letter (if you’re using a gift as your down payment)

Lenders will review these documents, along with other items such as your credit report, in order to determine how much of a mortgage you can afford. They will also review a couple of key calculations to make that determination:

Gross Debt Service (GDS) Ratio: Lenders use a borrower’s GDS to determine whether the borrower has an acceptable debt level. Your GDS is the percentage of your gross monthly income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes, heating, and half of your condominium fees (if applicable). Generally, for a lender to consider you for a mortgage, your GDS should be no more than 35% of your gross monthly income.

Total Debt Service (TDS) Ratio: Lenders also review your TDS ratio. Your TDS is the percentage of your gross monthly income needed to cover your monthly debt load, which includes your housing costs, plus all of your other debt payments (car loan or lease, student loans, lines of credits, etc.). Your TDS should not be more than 42% of your gross monthly income.

It is unlikely a lender will approve a mortgage if the mortgage puts your GDS above 35% and your TDS above 42%.

 

 

Working with a Real Estate Professional

It’s always a good idea to use a licensed real estate professional in your home search. When you interview real estate professionals you’re considering hiring, these are the kind of questions you should ask them:

  • how long have you been in the business?
  • do you have a job other than as a real estate professional?
  • how many buyers did you represent last year
  • what services will you provide to me?
  • what geographic areas do you serve?
  • do you specialize in certain property types?
  • how will you search for my new home?
  • how do you handle multiple offers?
  • how do you present my offer to the seller?
  • what are the top three things that separate you from your competition?
  • are you working as part of a team or will I always deal directly with you?
  • how do you get paid?
  • how much do you charge for your services?
  • will you work for me exclusively, not the seller?
  • how do you handle conflicts of interest?
  • will you do a property evaluation on the home I want to buy?
  • how do you keep me informed?
  • how many clients do you work with at any one time?

After you’ve chosen a real estate professional to work with, one of the first things they should show you is RECA’s Consumer Relationships Guide (Guide). The Guide is a mandatory document, which real estate professionals must provide to, and discuss with, consumers they’re working with.

The Guide will help you understand your legal relationship with your real estate professional, and explains the three types of relationships you could have with your real estate professional:

  1. An entire real estate brokerage can act as your agent. This is a common law agency relationship and means you have a relationship with all of the brokerage’s real estate professionals.
  2. An individual real estate professional (or team of professionals) can act as your agent. This is a designated agency relationship.
  3. You can be the customer of a real estate professional. You do not have an agency relationship with anyone at the brokerage; they are not acting as your agent.

The Guide explains the three relationships in more details, including what responsibilities your professional will have to you in each. Your real estate professional will ask you to sign an acknowledgement that you have read the Guide, discussed it with them, and received satisfactory answers to your questions.

If you decide to enter into a client relationship with your real estate professional, they will ask you to sign a written service agreement. Written service agreements are required in Alberta when you’re a client of a residential real estate professional.

Written service agreements help real estate professionals clearly and confidently communicate with their clients about:

  • the relationship between the parties
  • the services to be provided by the brokerage
  • the obligations and responsibilities of the parties
  • consent for collection, use and distribution of personal information of the client
  • method of calculation of remuneration or how the industry professional will be compensated

You can negotiate the specific terms of the written service agreement you sign, and in fact, you should never sign an agreement that has terms you don’t agree with or don’t understand.

You can negotiate:

  • the duration of the agreement
  • whether it’s exclusive or non-exclusive (In an exclusive agreement, you agree to only use the services of that brokerage to represent you. In a non-exclusive agreement, you may use the services of multiple brokerages at the same time)
  • the remuneration (if any)
  • services to be provided
  • clauses for early termination of the agreement.

If your real estate professional promises certain services, include them in your written service agreement. Written service agreements provide an opportunity for you to ensure you’re getting the services you want, need, and expect from your real estate professional.

 

 

Conflicts of Interest

In rare situations, you may run into a conflict of interest. It arises when there is a real or apparent incompatibility between a real estate professional’s interests and your interests. Some examples of common conflicts that may arise in a real estate transaction:

  • if you find a home to buy and the seller is related to your real estate professional. This is a conflict of interest because your real estate professional is supposed to put your needs above all else and if they’re related to the seller, it could be difficult for them to do so
  • you want to buy a property that your real estate professional owns. This is a conflict of interest because your real estate professional is supposed to represent your best interests, and they won’t be able to fulfill that fiduciary duty if it’s their property you want to buy
  • you find a property you want to buy, but your real estate professional also represents another buyer who wants to buy the same property. This is a conflict of interest because your real estate professional has the same responsibility to both buyer clients; to put their needs above all else. Your real estate professional cannot act in the best interests of both of their buyer clients.
  • you find a property you want to buy, but your real estate professional also represents the seller. This is a conflict of interest because your real estate professional has the same responsibility of undivided loyalty to both you and the seller, and cannot act in the best interests of both you and their seller client.

Real estate professionals have an obligation to avoid, and disclose any conflicts of interest to you as soon as they arise.

That disclosure requires them to:

  • give you all the details they know about the conflict
  • explain why they believe they are in a conflict or potential conflict of interest
  • describe how the conflict affects you
  • advise you to obtain independent advice

Transaction brokerage is a way to deal with the one specific type of conflict of interest that arises when your real estate professional also represents the seller of a home you want to buy. It allows your real estate professional to work with both you and the seller client in the same transaction.

In transaction brokerage, your real estate professional becomes a transaction facilitator, and treats you and the seller in an even-handed, objective, and impartial manner. The real estate professional no longer owes you or the seller undivided loyalty.

If you and the seller agree to proceed in transaction brokerage, you will both have to sign an Agreement to Represent Both Buyer and Seller form, which ends the sole agency representation for you and the seller, and it sets out the terms of the new relationship between your real estate professional, you, and the seller. If you or the seller don’t agree to transaction brokerage, your real estate professional will present you with other options.

Once you are aware of any conflict of interest, it’s up to you how you want to proceed. You may want to get legal advice or you may want to proceed with a different real estate professional.

Your real estate professional cannot provide services to you if they are in a conflict of interest unless you give them your written informed consent.

 

 

Finding the Right Place

Now the fun part begins. It’s time to find the perfect home.

Consider:

  • location
  • home style – condo apartment, condo townhouse, single family home
  • number of bedrooms
  • number of bathrooms
  • features – garage, yard, basement suite
  • inclusions – appliances,
  • price
  • size

It’s a good idea to make a list of your needs and your wants so you can better focus your search. What are you must-haves? What are you willing to do without?

Property size is one common primary consideration for buyers. Your real estate professional is going to talk to you about property size, and the Residential Measurement Standard (RMS) in Alberta. Real estate professionals in Alberta must use the RMS when describing a residential property’s size.

The RMS offers a consistent means of representing the property’s above grade space, and it sets out what parts of a property can be included in its measured-area. If property size is important to you, tell your representative, and take steps to verify the size rather than relying on the seller’s representation.

Keep in mind, though, that a property’s size isn’t the only thing sellers are using to set a listing price for their home. Two homes, with the exact same measurements, are unlikely to sell at the same price. The price of a home also depends on location features, décor, and upkeep.

Other considerations

Beyond the size, location, and specific features of a home – there are additional things to think about and ask about as you look at properties: material latent defects and stigmatized properties.

Material latent defects are defects a person cannot discover with reasonable care during an inspection. They include defects that:

  • make a property dangerous or potentially dangerous
  • make a property unfit to live in
  • make a property unfit for the buyer’s purpose (if the buyer has told their industry member or the seller’s industry member the purpose)

By law, sellers, and their real estate representatives, must disclose known material latent defects to potential buyers.

You may also want to discuss stigmatized properties with your real estate professional. The term “stigmatized” means an unfavourable quality in a property or one that may make the property less attractive or unattractive to some buyers. Buyers may avoid stigmatized properties for reasons that are unrelated to the physical condition or features. Stigmas may include:

  • that a suicide or death occurred in the property
  • the property was the scene of a major crime
  • the address of the property has the wrong numerals
  • reports that a property is haunted

If there are certain stigmas that matter to you, you need to talk to your real estate professional about them. Because these type of stigma are not material latent defects, the seller is not required to answer your questions, but if they choose to answer – they must do so honestly. If they refuse to answer, you’ll have to decide if you’re comfortable proceeding without the information.

Special listing situations

Some listings may say “as-is, where-is” or “judicial sale/foreclosure.”

In an as-is, where-is sale, there is no guarantee as to the property’s condition. There can be a significant amount of risk in buying an as-is, where-is listing.

A judicial sale is the sale of real property under the authority and supervision of the Court of Queen’s Bench. The property may be offered at a lower than expected price, but there will be conditions attached to the home’s sale. For example:

  • you may not have access to condominium documents
  • your purchase may require approval through the Courts, which can significantly delay it proceeding – if at all
  • there may be a set minimum deposit
  • it’s possible in a foreclosure situation, right up until possession day, that the sale can fall through

You’ll need to carefully weigh these restrictions against the fact the property may look like a good deal.

 

 

Making an Offer

You’ve found the perfect home, you have your deposit, and you’re ready to make an offer. There are a few things you can do to prepare:

Review the Real Property Report: a Real Property Report (RPR) is a legal document prepared by an Alberta Land Surveyor that shows property boundaries and improvements (structures) relative to boundaries. You want to ensure an RPR has evidence of municipal compliance, which confirms property improvements comply with municipal Bylaws and Regulations. If there is no RPR available, discuss your options with your real estate professional and your lawyer.

Search the address: Search the address of the property or, in the case of a condominium, the name of the condominium building/complex. An internet search can uncover quite a bit.

Conduct a Historical listing search: A historical listing search will show you the listing history of the property.

Look into warranties and representations: Alberta has an online public registry of homes covered by a new home warranty.

Writing the Offer

Offer price: Your real estate professional will provide you with information to help you make an informed decision on what to offer. That information will include looking at comparables (recent sales of similar properties in the same neighbourhood), and discussing your preferences. It’s your choice what to offer.

Deposits: A deposit can be a sign of how serious you are about the purchase. You need to have the deposit ready at the time of your offer.

Terms: A term is a detail in the purchase contract that the buyer and seller agree to. Terms include:

  • Possession date: the date on which you will take possession of the property.
  • Inclusions and exclusions: Inclusions are items you want included in your purchase, typically appliances, security systems, etc., and exclusions are items excluded from the purchase, for example if the sellers are taking the curtain rods or TV wall mount with them. Inclusions and exclusions can be negotiated between the parties. Attached goods are items you cannot remove from the property without causing damage. Unattached goods are movable items. In the absence of specific inclusions or exclusions in the offer to purchase, attached goods are typically included in a sale while unattached goods are not.
  • Time for acceptance/expiry of offer: You want to include an expiry date/time that:
    • creates a sense of immediacy for the seller
    • may encourage the seller to review your offer before others
    • removes the need for you to formally withdraw the offer at some point in the future
  • Pre-possession inspection: A pre-possession inspection term gives you the opportunity to view the property, with your real estate professional, prior to possession. Such an inspection can help you confirm the property is in substantially the same condition as it was when you viewed it and made your offer.

Conditions: Buyers often place conditions in their Offers to Purchase to protect their interests. When you write a conditional Offer to Purchase, it means you want to buy the property but before making it a firm sale, you want the ability and time to review or confirm information. Some common conditions include home inspection, financing, and a review of condominium documents (if buying a condominium).

The conditions you may want to include will differ depending on the type of property, for example:

  • if you’re buying a single-family home, you may want a home inspection
  • if you’re buying a condominium, you may want condominium document review condition
  • if you’re buying a country residential property, you may want satisfactory results of a water or soil test as a condition

All conditions need to have an expiry date. Make sure the expiry dates you include will provide you with enough time to satisfy the conditions. If you don’t waive your conditions in writing by their expiry date, the contract ends, and you and the seller have no further obligations to each other. If you are ready to waive your conditions, your real estate professional will provide you with the required waiver, and the purchase contract becomes final and binding

 

 

Negotiations

There will likely be some negotiation between you and the seller after you submit an Offer to Purchase. Sellers can outright accept or reject your offer, make a counter offer, or ignore your offer completely.

  • if the seller accepts your offer, congratulations! If your Offer to Purchase contained conditions, your real estate professional will help you do what needs to be done in order to satisfy those conditions
  • if the seller rejects your offer, you can either submit a new Offer to Purchase or look elsewhere
  • if the sellers provide a counter offer, carefully review it and any terms and conditions. A counter offer likely contains a different selling price, but the sellers may also counter on possession date, inclusions/exclusions, terms, or conditions. If you want to accept their counter offer, make sure you review everything in it. If you want to change anything, you are essentially providing the sellers with a counter offer rather than simply accepting their counter offer
  • if the seller ignores your Offer to Purchase, it’s essentially the same as rejecting it. It’s up to you how you want to proceed. Do you want to write a new Offer to Purchase or look for a different property?

Multiple offers: A multiple offer situation is when multiple buyers submit an Offer to Purchase on the same property, at the same time. It’s the seller who determines the process, including whether they want to disclose the multiple offer situation to potential buyers. If the seller discloses a multiple offer situation, your real estate professional will:

  • tell you of the multiple offer situation
  • advise you of the seller’s options
  • attempt to personally attend the offer presentations
  • advise you of YOUR options, including:
    • increasing your offer prior to its presentation to the seller
    • 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

 

Satisfying and Waiving Conditions

If your accepted offer was conditional, you need to try to satisfy your conditions.

Financing: If you included a financing condition, you need to confirm your financing before waiving this condition. Before you waive your financing condition, your lender (or mortgage broker, if you’re working with one), will need documents related to the property you’re buying. They will likely need:

  • a copy of your accepted Offer to Purchase
  • the listing sheet for the property you’re purchasing
  • copy of the Real Property Report for the property (single family home/bareland condo)
  • current title for the property

Make sure you carefully review the mortgage commitment provided by your lender. Lenders sometimes include various conditions in such a commitment. If your lender includes conditions, carefully consider whether you are ready to waive your financing condition on the Offer to Purchase.

Home inspection: If you included a home inspection condition in your Offer to Purchase, it’s time to hire a home inspector. Home inspectors in Alberta need a Home Inspector’s Licence through Service Alberta. A home inspection is a professional opinion on the condition of a property based on a non-invasive examination of its features and components.

The home inspector will give you a written report of their findings. This report will give you a sense of the condition for a number of major components, which typically will include electrical, heating/air conditioning, roof, and foundation. The home inspector will also attempt to determine if the property has any moisture problems, but they base that assessment only on what is visible.

It’s not unusual for a home inspection to uncover issues. Talk about the report with the home inspector and with your real estate professional.

Remember that when you include a home inspection as a condition, that condition only covers a home inspection by a home inspector. If you would like additional inspections to occur, you need to include them as conditions in your Offer to Purchase.

Condominium document review: If you’re buying a condominium, you will likely include a condominium document review condition. Condominium documents relate to the operation of the condominium corporation. When you’re buying a condominium, you’re buying into the corporation, common property, and shared responsibilities. You want to ensure the condominium corporation is financially stable, managed well, and that the property is well maintained. The seller is required to provide you with a number of condominium documents. These include but are not limited to:

  • current operating budget and fee schedule
  • current balance sheet
  • recent audited financial statements
  • reserve fund study and plan
  • registered bylaws
  • AGM meeting minutes
  • six months of Board meeting minutes
  • insurance certificate
  • management contract
  • post-tension cable report (if applicable)
  • any age restrictions in place
  • engineering reports
  • parking details
  • registered condominium plan
  • listing sheet
  • offer to purchase

There are professionals who will, for a fee, do this review for you, provide you with a summary of the documents, and identify areas about which you might have concern.  That review can uncover financial difficulties, unacceptable bylaws (for example, restrictions as to size, number or type of pet), or necessary maintenance. Your reviewer will discuss their findings with you – highlighting anything of concern. While you want to ensure the unit itself is what you’re looking for, and that it will serve your purposes as a home, you also want to make sure you’re comfortable with the way the corporation is run.

Conditions are met

If you meet all of your conditions and you’re prepared to proceed with your purchase, your real estate professional will provide you with a waiver to sign.

If you do not waive all of your conditions, your accepted Offer to Purchase is null and void. The seller has no further obligations to you and you have no further obligations to the seller.

If you waive your conditions, and end up not proceeding with the purchase, you could lose your deposit and may be subject to legal action. Only waive your conditions if and when you’re confident you’re going to proceed with the transaction.

 

 

Preparing for Possession

You will need to find and meet with a real estate lawyer. Your lawyer will go over the legal documents with you, including the RPR and the title. They will also highlight any possible restrictions or caveats registered against the property, discuss closing costs and disbursements, and have you sign the documents to transfer the property’s title to you after your lawyer advances the purchase funds to the seller. You’ll need to bring photo ID to your meeting with your lawyer. Some lawyers require two pieces of identification. Ask your lawyer specifically what forms of ID they accept.

Title Insurance

Your lawyer will also discuss title insurance with you. Title insurance works like a standard insurance policy, and protects against future discoveries about the insured property. It is a form of indemnity insurance for a mortgaged property. As insurance, it covers the loss of an interest in a property due to legal defects.

There are two types of title insurance:

A lender’s title insurance policy, which the borrower usually pays for, is for the sole benefit of the mortgage lender. Your lender may require title insurance and you, as the buyer, will have to pay for it. It is for the sole benefit of the lender.

Owner’s title insurance is a separate policy where either the buyer or seller pays the insurance premiums to protect the buyer’s equity in the property. This title insurance may relate to coverage for title and non-title issues. For example, title insurance can cover future title fraud (i.e. if through fraudulent transactions and paperwork, someone loses title to a property they legally own – title insurance can assist in getting title back).

Once you’ve met with your lawyer and signed the documentation, including mortgage documents (if obtaining a mortgage), it’s really just a matter of waiting for the possession date. During the waiting period, you can:

  • arrange for your mail to be forwarded to your new address through Canada Post
  • schedule your utility hook-ups (electricity, gas, cable, etc.)
  • arrange for home insurance to take effect as of possession day or when you move in, whichever is earlier
  • hire a moving company (if using)

Additional Closing Costs

Beyond your lawyer fees and title insurance costs (if any), you may also have to pay other closing costs, including property tax adjustments. Because of the way property taxes work, you may be required to reimburse the seller some of the property taxes they’ve paid to their municipality in the current year. Your lawyer can provide you with more information about these costs. Talk to your real estate professional about your market and what costs you should expect.

 

 

What to Expect on Possession Day

Typically, possession occurs – and you’ll get the keys – around noon on possession day. If you included a pre-possession inspection as a term in your Offer to Purchase, your real estate professional will arrange that through the seller’s representative. It may take place the day before possession or the morning of; that’s up to you to negotiate with the seller as part of the offer process.

During a pre-possession inspection you want to ensure the property is in substantially the same condition as it was when you submitted your Offer to Purchase. Attached goods should still be in place, as should any additional inclusions that you had in your Offer to Purchase. Appliances should be in the same working order, too.

In terms of cleanliness, again, you should expect the property to be in similar condition as when you bought it, but there is nothing that requires a seller to clean the property to a certain standard.

Once you’ve taken possession, if you find the property is not in substantially the same condition or if something has been removed and should not have been, you need to call your lawyer as it will become a legal issue between you and the seller. By the time you get the keys, the money has typically transferred to the seller. Your real estate professional can attempt to discuss the matter with the seller’s representative, but if things aren’t fixed to your satisfaction, your only recourse is to speak to your lawyer.