Buying or selling a home – what you need to know
For most people, buying or selling a home is the largest purchase or sale they will make in their lifetime. It’s important to have the right professional on your side to ensure things go smoothly and that you are protected. The home buying or selling process can be confusing, but with capable guidance from a realtor and with professional advice from a lawyer, the entire process can be simplified. Be sure to work with a realtor and a lawyer that you trust. When in doubt, ask your friends and family for referrals and go from there. Most lawyers are selected based upon the recommendations of people who are knowledgeable of the quality of services provided by such lawyers.
To help ease the process, here’s what you need to know about the different phases involved in buying/selling a home:
Once you have found the home you want to buy, the next step is putting together an offer. Typically a realtor will prepare the offer. This is a great point in the process to bring in your lawyer to ensure the resulting agreement of purchase and sale is going to protect your interests as much as possible.
The key is to include good "conditions" in the offer – these are requirements that must be met in order for you to proceed. If for some reason one of these conditions cannot be met, you are still able to back out of the transaction. It is frequently uncommon for the first offer to be accepted, so be prepared to negotiate a counter offer. Sometimes multiple counter offers may go back and forth before you have agreed to a price, and more importantly, to the conditions.
Typically each condition in the offer has a date by when it must be met. If not met, depending on the outcome, you may choose to either back out of the sale or re-negotiate. If these dates, commonly referred to as requisition dates, pass by without notice of non-compliance then it’s assumed that the condition has been met. Therefore, if you are a buyer, it’s very important to be sure that you have ample time to shop around for a mortgage or find a reputable home inspector prior to the expiry of your requisition dates.
Most offers should include a condition that the buyer is able to receive financing to the buyer's satisfaction. It’s very important to ensure that, whenever possible, the financing conditions placed in the offer are to your satisfaction. Also, if you are a seller, you should ensure that the requisition date for compliance is early enough to prevent you from missing out on other potential buyers.
The next important step for buyers and sellers is to have a home inspection completed. Inspections cost somewhere around $500 and this is money well spent. Having your uncle look around at the electrical panel and the plumbing generally isn’t enough, unless your uncle is a certified home inspector of course. An inspector will inform you about the condition of the home and what work might need to be completed immediately or in the future.
It is recommended that either you or your realtor be present during the inspection. You need to have a good idea of what problems the property may reportedly have and what is in good shape. Serious issues may arise when the inspector goes through a property, and if there are major issues like mould, structural items not up to standards of the National Building Code, or other dangerous concerns, it may be impossible to obtain adequate property insurance. Not only do these issues affect health and safety, they can also make the property difficult to finance. A proper inspection will help you avoid being cast in one of the horror stories I’m sure you’ve heard about, where your house becomes a “money pit”.
The removal of conditions from the offer happens when you are satisfied that all terms have been met. At this point, financing should be settled, inspections completed and satisfactory, appraisal results sufficient, any surveys of the boundaries verified, and your lawyer should be confirming that the title to the property is clear. Once all of the conditions are removed, and the requisition dates are past, it’s official. This means both the buyer and the seller are firmly bound by the terms of the agreement resulting from the accepted offer.
The last step is the closing - this is when you will actually buy or sell the house. The closing date is typically set for a few weeks after all the conditions have been removed, but can be longer depending on the preferences of the buyer and seller. During this time, there are a few items you will need to arrange, such as fire insurance for the home commencing on the closing date, the set-up of hydro and utility accounts (crucial so you’re not left in the dark on moving day), and the scheduling of your movers.
To complete the transfer of title at the closing, your lawyer will prepare any relevant transfer and mortgage documents. Lawyer's fees typically range from $600 to $1,200 depending on a multitude of factors, which are mostly driven by the status of the title to the property or the complexity of the transaction. In addition to these legal fees you will also need to pay government fees, which include transfer tax, property certificates, and title registrations, among other things. In New Brunswick the current transfer tax imposed upon buyers is one per cent of the purchase price of the home. Typically, this transfer tax is the largest disbursement expense to be incurred at closing.
Your lawyer will estimate these fees and disbursements and will let you know how much money, in addition to any mortgage funds, you will need to provide to complete the transaction as a buyer. If you are a seller, your lawyer will ensure that you are reimbursed for prepaid taxes, utilities, and other costs, arrange for the discharge of any mortgage encumbering the property, and provide you with an estimate of the net proceeds of the sale.
A day or two prior to the closing, you will meet your lawyer to go through and sign a fair bit of paperwork. This can be fast and furious so don’t be afraid to ask questions until you feel comfortable with the process.
On the morning of the closing, a buyer will typically do a final personal inspection of the home. This inspection is for the buyer to ensure that the property is in the same condition as it was in when the offer was signed. Once the buyer is satisfied, the lawyers will exchange money and transfer documents. When completed, the buyer will be the proud owner of a new home, and the seller will have the proceeds of sale, net of any mortgage payout, to do with as the seller pleases . . . exciting day for both parties.