Acquiring the perfect home is a (hopefully fun!) but often stressful, process. This guide is about understanding that process and placing yourself in the best position possible to get the house of your dreams. It’s imperative to be ready, know the language and be able to make quick, strategic decisions.
STEP ONE
GETTING TO KNOW EVERYONE
Some key people:
1. MORTGAGE BROKER
Works with the buyer and hundreds of different lenders to ensure the buyer is getting the best mortgage / most agreeable terms.
2. LENDER
Provides the buyer with the money!
3. THE COOPERATING BROKERAGE/SALESPERSON Works with the buyer to help locate the right home.
4. THE LISTING BROKERAGE/SALESPERSON Works with the seller to market the home.
5. INSPECTOR
Provide basic inspections such as building, pest and/or environmental inspections.
6. APPRAISER
Provides the lender with their assessment/evaluation of the property’s value.
7. LAWYER
Handles the paperwork, transfers the home ownership and ensures a good property title.
8. INSURANCE BROKER
Provides the required insurance.
STEP TWO
CHOOSING A REAL ESTATE AGENT
The right advisor can make a huge impact on your purchases. Since you only work with one agent, it should be somebody you like, trust and respect who feels the same about you. You want an agent who will anticipate your needs and alert you to possibilities (or pitfalls) you may not have thought of/seen.
Working with somebody who has a deep network of clients, experience, and (equally as important!) is connected to other top agents, for access to exclusive, private opportunities is imperative. Some properties never see the light of Realtor.ca because a savvy agent snaps it up for their buyers beforehand. The right agent will save you money and make you money.
AMANDA MARTINEZ
SALES REPRESENTATIVE
Before leaping into real estate, I had my own digital marketing agency and worked with clients across different industries, ranging from big budgets to smaller ones and everything in between. I love marketing because it lets me help people achieve their goals and for me to exceed their expectations.
The same is true for me with real estate.
I always aim to go above and beyond. Whether marketing your property and finding you the best buyer, helping you find your next (or first) home, the right lease for you at this stage of your life, or an investment property that you can set and forget, you can expect the absolute best service from a real estate agent that you’ve ever had.
I am here to be on your side and will provide the information and experience needed that will allow you to make the best decision for you.
It’s time for honest real estate in Toronto. And that is exactly what I will deliver, one transaction at a time.
AMANDA ACCORDING TO ALEX BROTT
Amanda the hustler. This dynamic force of a woman brings her unmatched energy, diligence and dogged determination to every client in every scenario. She is funny, disarming and you feel like you’ve known her your whole life. An absolute fire-breathing dragon at the negotiating table. We are so lucky to have this lady!
STEP THREE
UNDERSTANDING AGENCY RELATIONSHIPS
TRESA
The Real Estate Council (aka RECO) is the overlord of Real Estate in Ontario. Recently (December 1st, 2023) they introduced some new rules known as the ‘Trust in Real Estate Services Act 2020’ (TRESA). In an effort to create better understanding and transparency regarding types of representation, Buyers are now required to read and acknowledge the RECO Information Guide. You can find this guide at the QR below. I am happy to review with you.
Representation Agreements are required by law in Ontario.
You can choose to be a ‘Client’ or a ‘Self-Represented Buyer’
What’s the difference?
A ‘Client’ relationship is the highest form of representation and is similar to the legal relationship with a lawyer. It means that if your agent knows any material or pertinent details of a property, it is passed on to you, the buyer.
They must take reasonable steps to determine and then disclose to you, all the material facts about a property you are considering. Details like ‘This property you like? The city is considering turning the land across the street into a landfill in a few years’.
The buyer agent for a ‘Client’ is required to work in the best interest of the buyer at all times and has fiduciary* obligations - which are both ethical and legal. They must act first and foremost for the party whose assets they are managing.
A client representation is the most comprehensive and beneficial relationship for tenants and buyers because Realtors ® owe their clients legal fiduciary duties, such as confidentiality, skill and obedience. The key here is that Realtors ® must provide total allegiance to their clients.
‘A Self-Represented Buyer’. Self-representation means that you, the Buyer, would be representing yourself should you offer on a property. As a self-represented buyer I cannot (aka I am not allowed) to provide any information/guidance to you other than what is available in the MLS ® listing. I cannot coach you on strategy, price, potential clauses you’d want to include, comparable listings or anything of the sort. Essentially, I am there to open the door for you as a licensed agent and the rest is up to you. Agents have no fiduciary obligation in this case.
*Fiduciary Duty: Legal relationship between a buyer or seller and their agent.
STEP FOUR
FINANCING | BUDGETING | MORTGAGES | MONEY STUFF
REQUEST YOUR CREDIT REPORT
Credit reports show your credit history and are many lenders barometer for if and how much money they are willing to lend you.
Request a free copy of your report from Equifax and/ or Trans Union Canada to be sure they are accurate. Be sure to challenge any errors. You are looking for things like charges older than seven years and inaccurate figures.
www.consumer.equifax.ca
www.transunion.ca
PRE-QUALIFYING FOR A MORTGAGE
Pre-qualification is the lender’s estimate of your borrowing power determined by your application, credit history, income and debts.
PRE-APPROVAL
Pre-approval formalizes the lender’s estimate (point above) and concludes with a letter or certificate of commitment from a lender that confirms approval for a specified amount at specified terms.
Do not make any major changes to your employment or debt services from when you get approved from when you get possession. Consult with the lender with any anticipated changes.
If you already own a home, ask about bridge financing.
DEPOSIT
This is the amount of money (typically in the form of a bank draft/certified cheque) that accompanies your offer to purchase. The money is delivered to the listing brokerages office and is held ‘in trust’ until the deal is closed at which time the lawyers will disperse it appropriately (to the lender). Typically, in the city of Toronto, a regular deposit is 5% of the purchase price.
More is better.
*You could potentially lose this money if you cannot close the deal.
*The money must be liquid in a bank account that is accessible and be able to withdraw at command.
TOTAL DOWN PAYMENT
This is the amount of money you have to invest in a down payment and closing costs. If you already own a home, your equity can be added to this total. You can determine an estimation of this amount by talking with your financial advisor. *Make sure your total down payment - minus the deposit - is in your main bank account (not investments, or TFSA’s etc) a week or two before closing to ensure a smooth transfer of funds on closing day.
LAND TRANSFER TAX
Don’t shoot the messenger, but Toronto is a crazy place and we have not just one, but TWO land transfer taxes.
The amount of land transfer tax a buyer pays depends on the purchase price of the property they buy. Find a land transfer calculator on our website: BrottCo.com
CLOSING COSTS
Do not forget about these:
LAWYER FEES
$1,500 - $3,000 depending on what you buy.
ADJUSTMENTS
Where does the hydro bill fall in the closing bill cycle, property taxes etc.
TITLE INSURANCE
MOVING/MOVERS
HOME INSURANCE
UTILITY
Set ups at the new place (internet, hydro etc.)
CONDO BUYERS
*Get in touch with property management regarding costs and restricted times for moving in.
STEP FIVE
THE NITTY GRITTY. SAGE ADVICE FOR HOMEBUYERS.
CREATE A WISH LIST
Everyone loves this part! Buying a home requires a little bit (and sometimes more than a little bit) of compromise, which is why you need to prioritize your needs and wants before you start searching. You may find that these priorities change once you really start looking.
Lower your expectations for higher results.
LOOK AT EVERYTHING
Toronto is a city of neighbourhoods and you should check them all out. Drive around. Get a coffee. Sit in a park. Feel it out. You can change a lot about a house but you can’t change the location…so make sure it’s the right one within your budget. Try to buy into a location that you predict will be equally attractive in the future. If you’re new to Toronto, ask your agent to take you on a few driving ’tours’.
CHECK OUT THE SCHOOLS
The school district is important (even if you don’t have children!) for resale.
BUYING THE WORST HOUSE ON THE BEST STREET
Buying the worst house on the block doesn’t hold a lot of appeal for most homebuyers but it is GREAT advice for investors. The nicer homes on the street will pull up the value of the worst house on the block after it’s fixed up. It is often the most affordable way to move into an otherwise unaffordable neighbourhood. A great location will help ensure the home maintains its value in the future. PS VERY NB** get repair estimates before making an offer! We have a large network of trades who we use and trust ourselves.
ALSO VERY NB HOME INSPECTIONS
Some insurers / lenders require immediate remediation (if there is knob and tube wiring, or Kitec plumbing for example) they will ask you to repair and provide proof within a specific time period (usually 60-90 days).
DO A SELF CREDIT CHECK
Check for errors on your own credit report!
PAY OFF YOUR DEBTS!
Lenders are more forgiving to buyers who have recently been making regular, consistent, on-time payments.
STEP SIX
MAKING AN OFFER
The most common elements of an offer:
PRICE
Price is determined based on comparable listings, sales and current market conditions. How many other offers you are competing with may also play a factor. Talk with your agent about what the house will likely sell for and manage expectations.
CLOSING DATE
This is the date ownership changes hands. The day you get the keys! When you are making an offer, flexibility on closing date can give you a big advantage over another buyer and can allow you to negotiate more favourable terms. It’s important to mention the ‘key’ exchange may happen at any time on the day of closing which can make your move a bit of a moving target. Best to assume that you will get the keys at 5pm on the day of closing and if you get them any earlier, it’s a bonus.
DEPOSIT
The deposit (not to be confused with the down payment) is the bank draft / certified cheque that accompanies the offer you submit. If your offer is accepted, the bank draft goes into the listing brokerage’s Real Estate Trust Account and is held there until the closing date. The lawyers apply the deposit to the down payment and move the money to the lender. *Make sure this deposit money is in your bank account when you start looking. Some times it takes a few days to move money between accounts and if you want to offer on a property and don’t have a deposit, you will not be able to offer.
IRREVOCABLE
Irrevocable is defined as “incapable of being recalled or revoked”. It means your offer is unchangeable and unalterable until a specific time/date, after which time, if the offer is not accepted (or countered!) it becomes void. If your offer is countered by the seller, they will provide you, the buyer, with an irrevocable time from them. Times and dates are crucial in a real estate transaction. If you are making an offer, make sure you are reachable until the offer comes to a conclusion.
CONDITIONS
Conditions for financing, home inspections, and for condos, a lawyer’s review of a status certificate are all common to include with an offer. It is a way of doing your own due diligence before you fully commit to buying the home. In a competitive market such as Toronto, where you may be competing with many other offers, it will strengthen your offer to have fewer (or zero) conditions.
*There are many ‘boiler plate’ clauses in an offer and many components that change. You’ll go over everything with your agent at the time of offer but never hesitate to ask if you’d like to read through an offer ahead of time just to familiarize yourself.
HOW TO WIN
Toronto is an extremely competitive market. Multiple offers on both houses and condos are more common than not. Since only one buyer gets the house, here’s how to stack the odds in your favour:
• Knowing the market so that you are in a position to bid high without overpaying too much.
• Accommodating the seller’s requested possession date or offering a seller-flexible possession.
• Few, if any, conditions.
• As big a deposit as you can.
• Many people are emotional about selling. A short note to the sellers accompanied by a photo can go a long way. Google the sellers and try to make it personal but not creepy.
• Proving your ability to close the transaction.
• Keeping yourself available when offers are being presented for last-minute negotiations. No matter where you are globally, as long as you have wifi, we can buy houses.
• Knowledge of the electronic signing software beforehand so that you can make any changes, quickly.
• Having faith and trust in your agent so you can make the best choice based on their insight.
THE DIFFERENCE BETWEEN APPRAISALS AND YOUR PRE-APPROVAL AMOUNT
Just because you were approved for $1.5M does not mean that the bank will lend you $1.5M on just anything.
The bank may decide that TO THEM, the property is only worth $1.4M. What happens then? YOU, the purchaser are required to make up the $100K difference on the closing date. If this happens, there are solutions but they can be temporarily expensive. This is rare but you to need to know, and this is why you work with an agent who understands the market and is working in your best interest. *See client relationship on page 10.
WHAT IS A “BULLY” OFFER?
When sellers list a hot property, they will often list at the low end of the value spectrum and ask for all offers to be submitted on a specific date, in order to generate competitive offers i.e. bidding war. Aggressive buyers do not want to compete. They want to ignore the offer date and submit an offer ‘too good to refuse’ earlier. Bully offers (they are sometimes called ‘Pre-emptive’ offers), must be extremely attractive to sellers in the terms and price. It has to be aggressive enough that the seller isn’t tempted to have open houses and more buyers through to see what they will get on the offer night. Typically, the more people who get their eyeballs on a house, the higher the selling price. A short irrevocable time on the offer is a smart way to put pressure on a seller to take your offer. Buyers making unattractive bully offers can easily offend sellers, which may put them at a disadvantage if they decide to try again on offer day.
STEP SEVEN
INSURANCE
There are a few different insurance requirements associated with home ownership:
HOMEOWNER’S INSURANCE
Protects your home against hazards, as well as liability coverage against injury to visitors. Policies can also protect the home’s contents. Your lender requires homeowner’s insurance in an amount at least equal to your mortgage.
MORTGAGE LIFE INSURANCE
The amount of insurance is equal to the principal amount of the mortgage. In the event of the mortgagor’s (the person borrowing the money) death, the balance of the mortgage is paid off.
MORTGAGE INSURANCE
Canada Mortgage and Housing Corporation (CMHC) insurance protects the lenders of high ratio mortgages (down payments below 20%) against default (for any purchase under 1 million). Talk to your mortgage advisor about all of these details.
TITLE INSURANCE
Eliminates the risks of defective property title. Protects property owners and their lenders against losses related to the property’s title or ownership. It is not a requirement to have Title Insurance in Ontario but we really encourage our purchasers to get it.
STEP EIGHT
THE ROLE OF A LAWYER
Buying property involves many legalities. It’s important to use a lawyer with real estate experience in Toronto. Although most transactions close without any problems, an experienced real estate lawyer is invaluable if any issues arise.
Toronto lawyers typically charge a flat fee for home buyers. Disbursements will be in addition to the quoted fee. Your lawyer will be able to provide you with exact disbursement expenses on your transaction.
WHAT DOES A LAWYER DO?
AFTER THE AGREEMENT IS ACCEPTED:
• Details exact closing costs. Don’t expect to know this exact number until RIGHT before the closing. It’s not because they don’t want to give you the number! It’s because they are waiting on the final adjustments.
• Searches title (looking for any liens, easements etc.) Anything that would affect the title of your property.
• Search taxes, utilities, building and zoning.
• Arranges title insurance.
• Execution search.
• Coordinates with lenders to arrange financial process for closing.
• Verify insurance policy documents (you must have home insurance in place before you close!)
• Calculates land transfer tax.
• Requests resolution with any issues resulting out of the title search.
A FEW DAYS BEFORE CLOSING:
• Address Provincial Sales Tax issues.
• Prepare mortgage documentation, statement of adjustments, and documents for land registry.
• Accept closing funds.
• Review and buyers signs necessary documentation.
CLOSING DAY (THE DAY YOU GET THE KEYS!):
• Exchange mortgage doc’s for money.
• Meet with the seller’s lawyer.
• Complete the final searches.
• Transfer funds.
• Register deed and mortgage in buyer’s name.
• Pay land transfer tax.
• Get the keys!
• Celebrate!
STEP NINE
COMPLETION OF THE TRANSACTION
Shortly before closing, your lender will forward the mortgage instructions and all loan documentation to your lawyer. You will be responsible for bringing the balance of your down payment, the land transfer tax payment and closing costs in the form of a bank draft or certified cheque. You may also wire directly, depending on your lawyer.
The day you take possession, get over to the property and test the appliances and the fixtures that came with the property - WORK. If they don’t work on the day of closing, you have some recourse, if they don’t work and you discover it the very next day….guess what?
It’s your problem now.
You also want to make sure, all the ‘inclusions’ are there and the ‘exclusions’ are not there.
If anything is out of order, take pictures/videos and call your lawyer immediately.
ABOUT US
If there is one word that sums up Brott & Co., it’s uncompromising. We set a high bar for ourselves. Our clients deserve the very best experience, and we are relentless in making sure they get it.
Sage is a family-run company. We have cultivated a combination of deep industry expertise and a fresh, progressive approach. We never stop thinking about how we can improve what we do so that we can deliver more value to our clients.
We monitor, respond and adapt quickly and strategically to help everyone stay ahead of the market. We provide industry leading knowledge, training and expertise supported by comprehensive marketing systems, an in-house creative team of professional graphic designers, in-house printing, and a highly respected management team.
We insist on the highest standards of integrity in every single thing we do.
COSTS TO CONSIDER
THE ROLE OF A LAWYER
Deposit Funds: Deposits become payable by the Buyer within 24 hours from the time of acceptance of their offer to purchase a property. These funds, usually about 5% of the value of the property, must be available at that time.
Legal Fees: These vary widely, get a personalized quote from a lawyer.
Home Inspection Fee: Home inspectors provide a physical condition check and structural assessment of the property confirming things that are in working order and identifying those items that may be in need of repair. Budget around $500.
Condominium Status Certificate: If purchasing a resale condominium an up-to-date status certificate is required. If the Seller has not already made one available the fee for providing a new status certificate often falls upon the Buyer. Cost: $100.
New Condominium Fees: Builders charge back to Buyers any municipal levies and development expenses that they incur and must pay when building the property. Lawyers can provide an estimate of these fees for each specific new freehold or condominium purchase.
Property Appraisal Fees: Mortgage lenders usually require an accredited property evaluation to confirm the market value of the property.
Sometimes paid for by the lender. $250 – $300 Survey: Lenders may require an up-to-date property survey (ranging from $1,500 to $2,500) but often title insurance is acceptable in lieu of a new survey. Property surveys are a requirement however for any intended renovation permit applications that require extensions to the property, pools, etc. Sellers may have an acceptable survey already in-hand.
Title Insurance: Title insurance policies protect the lender (and the Buyer) against a number of defects, including: existing zoning violations, encroachments, title frauds and defects, work orders, etc. Often title insurance will eliminate the need for an up-to-date survey of the property. $400 – $500
Closing Adjustments: These disbursements get paid by the Buyer to the lawyer. Adjustments include any Seller-prepaid taxes, utility bills, condominium fees and other charges that have already been paid for, calculated at completion and then to be reimbursed to the Seller. The lawyer can provide a closing adjustments approximation for each specific purchase. Land Transfer Tax (Ontario Provincial Tax and Toronto Municipal Tax)
Ontario Land Transfer Tax:
0.5 % – on the first $55,000
1.0 % – on amount between $55,000 and $250,000
1.5 % – on amount over $250,000
2.0 % – on anything above $400,000
Adjustable Rate Mortgage (A.R.M.): Mortgage with a rate tied to the prime rate that is variable.
Agency: Relationship a buyer or seller has with their real estate agent.
Agreement of purchase and sale (aka offer): Legal document that outlines the terms of a real estate deal that will be signed by both the buyer and the seller.
Appraised Value: Amount that a professional appraiser thinks a property is worth.
Canada Mortgage and Housing Corporation (CMHC):
Institution which administers the National Housing Act and provides lenders with insurance against high ration mortgages.
Clear Title: A property with no claims.
Closing Date: Date that the house exchanges hands from the seller to the buyer.
Cloud on Title: When a claim has been made against the title of a property.
Collateral: Tangible asset that is used as a guarantee of payment in a loan.
Common Elements: Parts of a condo building that are owned by all owners of the building.
Condition: Offer clause which outlines what has to happen before the agreement becomes binding.
Condominium: Form of ownership where the owner has the title to a specific unit and a portion of the common elements of a building.
Conventional Mortgage: Mortgage from a traditional lender where the value of the mortgage does not exceed 80% of the value of the property.
Cooperative: Type of ownership wherein the building is owned by a company. To be entitled to live in the building, you must buy shares.
Deed: Document that officially transfers ownership of a property.
Default: When a borrower is not able to make a debt payment.
Deposit: Money that is put down after an offer has been accepted and is held in trust.
Disbursements: Various expenses and costs that a lawyer will pay on behalf of a buyer to close the sale.
Down Payment: Amount that the buyer puts down on the property in cash.
Equity: Value of the property minus any outstanding debt.
Fiduciary Duty: Legal relationship between a buyer or seller and their agent.
Fixed Rate Mortgage: Mortgage that has a fixed amount of interest paid over a specific amount of time.
High Ratio Mortgages: Mortgage that exceeds 80%. These mortgages must be insured by the CMHC.
Hold Back: When money is held back by the lender until a condition is satisfied.
Homeowner’s Insurance: Protects homeowners against damage to their home.
Home Inspection: Objective evaluation of a house by a home inspector.
Irrevocable Period: The period at the end of which an offer expires.
Land Transfer Tax: Tax paid to transfer a property.
Legal Fees: Amount charged by lawyer to execute the purchase or sale of a property.
Lien: Legal claim against real estate to guarantee payment of a debt.
Listing Agreement: Formal agreement between the seller and a real estate brokerage company authorizing a particular piece of real estate for sale.
Listing Broker: The real estate brokerage company that represents the seller.
Lock-in: A buyer tells the lender that they accept a certain interest rate for a certain amount of time.
Maintenance Fee: Fee a condo owner pays each month towards upkeep of the common areas.
Mortgage: An agreement between a lender and borrower where the real estate is collateral for a loan.
Mortgage Broker: A professional who brings together borrowers and lenders.
Mortgage Insurance: Also referred to as mortgage loan insurance or mortgage default insurance, this is offered through CMHC and covers the lender when a borrower has less than 20% down payment. There are three different Canadian mortgage insurance providers: CMHC, Genworth Financial Canada, Canada Guaranty.
Mortgage Life Insurance: Covers the mortgage value in the event of the death of the mortgage holder.
Mortgagee: Lender.
Mortgagor: Borrower.
Pre-approval: A written commitment from a lender to lend a buyer a certain amount of money at specific terms.
Principal: Base amount of money borrowed.
Real Estate Agent (Broker): The brokerage company that represents either a buyer or seller in the process of buying or selling real estate.
Realtor ® : A registered real estate sales representative or broker.
Refinance: When a new mortgage is obtained and used to pay off the old mortgage.
Statement of Adjustments: Amount of money owed at the time of closing.
Selling Broker/Cooperating Broker: The real estate agent who represents the buyer.
Survey: Document that outlines the property line on a piece of real estate as well as the location of any fences, encroachments and buildings on the property.
Term: Amount of time a lender lends funds to a borrower.
Title Insurance: Insurance that assures that the real property remains the property of the buyer if a claim against the property is processed.
Title Search: The process of checking records to ensure the seller has the legal right to sell the property.
Trust Account: Bank account used by brokers to keep protected deposit funds separate from other funds.
Trust in Real Estate Services Act, 2020 (TRESA): A replacement of the Real Estate and Business Brokers Act (REEBA). It is legislation that governs how Real Estate Professionals are to transact business in Ontario with increased consumer education, protection and transparency.
Underwriting: Calculation of risk involved for a lender.
Variable Rate Mortgage: Mortgage with fixed payments but where the interest rate is adjusted to market levels.
Warranty: Legally binding commitment to guarantee that the house is in good condition.
