Buyer Frequently Asked Questions


Do I pay you commission as a Buyer?
No! Commissions for both the Listing and Cooperating Sales Representatives are traditionally paid by the Seller out of the sale price of the home.
 

What is the difference between the Multiple Listing Service (MLS) and the consumer website REALTOR.ca?
The Multiple Listing Service is a system used and accessible only to Realtors. The MLS system contains detailed information and numerous search tools, all designed to match people with the properties that fit their exact requirements. REALTOR.ca is a website operated by the Canadian Real Estate Association (CREA) that displays an abbreviated version of most listings uploaded to the MLS system.
 

I saw a great house on MLS.ca but when I drove by, it was already sold?
MLS.ca imports its information from the Toronto Real Estate Board, and there can be a time lag. Your Realtor will have the most up to date information regarding available properties.
 

Why should I work with a Realtor when buying a home?
A Realtor's knowledge and experience is invaluable when matching you with the home that fit your needs and budget. A sales representatives' job is to represent your interests. We act as a buffer between you and the Sellers, negotiating the best terms for you. We negotiate well because, unlike most buyers and sellers, we can remove ourselves from the emotional aspects of the transaction. As professionals we are trained to present our client's case in the best light and agree to hold client information confidential from competing interests. Realtor's possess industry and market knowledge and are able to provide you with comparable neighbourhood sales, average per square foot cost of similar homes, median and average sales prices, days on market and ratios of list-to-sold prices, among other criteria, which will have a huge bearing on what you ultimately decide to do. As sales representatives, we network with other professionals, many of whom provide services that you will need to buy or sell. And finally, we handle volumes of important, legal paperwork so you don't have to!
 

What is a Buyer Agency Agreement and why would I sign one?
When selling a home, a home owner will sign a Listing agreement with a specific Realtor, employing their services for a specific period of time. There also an agreement that we, as Realtor's, ask our home-buying clients to sign. It's an agreement that works in favour of buyers, guaranteeing the very best in real estate service. The Buyer Representation Agreement signifies that for a designated period of time, the buyer has engaged a specific Realtor to work exclusively on his or her behalf at finding a property. The agreement confirms the Realtor's commitment to make his or her best efforts for the buyer. A Buyer Agency Agreement puts in writing that your Realtor is working for you - it is a guarantee that we will do everything that is required to find you the home you want to buy.

What am I agreeing to in a Buyer's Agency Agreement?

In return for a Realtor's services, you will be agreeing to the following when using the standard OREA Buyer's Agency Agreement form.
1. That you will use a particular broker as your sales representative to purchase real estate of a particular type and area.

2. You agree that your sales representative will be paid a set commission.
3. That your sales representative has explained Agency and that you understand agency, including what happens under Dual Agency.
4. If you see any property that might interest you, you will inform your sales representative so that your sales representative can get the information you need on the property while protecting your information.
5. You acknowledge that Realtor's are not trained to determine the physical condition of a property, and that you understand that understand that you have been advised to have the property inspected by a home inspector.

If I just want to get in to see some houses, why do I need a Buyer Representative?
A Buyer Representative does a lot more for you than just open up a house. We listen carefully to your needs and values so we will know how best to help you find the right property. We negotiate with your best interests in mind, acting as an intermediary between you and the seller and protecting you from costly mistakes.

How much can I afford to pay for a home?
The amount of a mortgage for which you can qualify is generally determined by what are known as qualification ratios: Gross Debt Service ratio and Total Debt Service ratio, or "GDS" and "TDS". Lenders evaluate monthly income, as well as monthly debt obligations, to determine a fair and feasible amount of mortgage available to the borrower.

Generally, lenders will have an acceptable Gross Debt Service ratio ranging from 28-32%. In other words, 28-32% of one's monthly household income can be reasonably set aside for a mortgage payment. Furthermore, most lenders will have an acceptable Total Debt Service ratio of 36-40%. In other words, 36-40% of one's monthly household income can be reasonably set aside for total debt obligations, including the mortgage payment.

What is a pre-approval? Should I get one? Why is it beneficial to me?
A mortgage pre-approval takes much of the guess work out of the financial part of home buying. It is an essential first step that will help you determine how much house you can afford. Whether you decide to work with a mortgage broker from your bank or an independent mortgage broker, there are many benefits to you as a Buyer.

1. You will know exactly what price range you can afford. This means you can focus your efforts on looking at houses that fit within your budget.

2. You eliminate the majority of paper work up front so that when it comes time to put in an offer on a house, you can significantly speed up the financing process

3. A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. If rates go up, you will reap the benefit of the lower rate.

4. If several buyers are interested in the same property that you are, being pre-approved can give you an advantage. Sellers are more likely to accept an offer from a buyer who has been pre-approved over a buyer who has no guarantee that they can attain the financing for the amount they offered

The pre-approval is calculated based on information provided by you and is generally subject to certain conditions, like 'written employment and income confirmation' and 'down payment from your own resources' being met before the mortgage is finalized.

What is a down payment?
The down payment is the portion of the purchase price that you provide yourself and represents your financial stake, or equity, in the home. The larger the down payment, the less your home costs in the long run.

What is the minimum down payment needed to buy a home?
You can become a homeowner for as little as 5% of the purchase price. Depending on the amount, your mortgage will be classified as either conventional or high ratio. If your down payment is less than 20%, you will have a high-ratio mortgage that must be insured against default. That means you'll pay an insurance premium to protect the lender in the event that you become unable to make payments. You can choose to pay the premium in one lump sum or have it added to your mortgage payments. While your down payment can be as low as 5%, keep in mind that the larger the down payment you make, the less your home will cost over the long term.

What is a conventional mortgage?
A conventional mortgage is usually one where the down payment is equal to 20% or more of the purchase price, a loan to value of or less than 80%, and does not normally require mortgage loan insurance.

What is mortgage loan insurance?
Mortgage loan insurance is insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and GE Capital Mortgage Insurance Company, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%.

What money can I use for down payment?
 
You can use any of the following sources for your down payment.
  1. Savings: Make it a habit, or better yet, set up your accounts so that a preset amount is transferred either weekly or monthly to your savings account.
  2. Gift: You can use a gift from a close relative provided the giver states that it is a gift and is not repayable. They also have to declare that they will have no interest in the property purchased.
  3. Equity from the sale of another property: Any profits from the sale of an existing property may be used as down payment. If you do not have the money from the sale of an existing property yet, you will have to provide the lender with a copy of a firm offer on the property and a mortgage statement to verify the available equity.
  4. Borrowed Funds: you are now allowed to use a loan to make a down payment, PROVIDED THE DEBT AND THE MONTHLY PAYMENT OF THE LOAN IS INCLUDED IN YOUR DEBT RATIO CALCULATIONS.
  5. RRSP: a first time home buyer can withdraw up to $25,000.00 per person ($50,000 per couple) of your existing RRSP to use toward the purchase of your first home. You have ten years to repay this amount to your RRSP starting the first year after the purchase of your home. To qualify, the RRSP funds you're using must be on deposit for at least 90 days.

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What's the difference between a down payment and a deposit?
A down payment is the amount of your own money that you put towards the purchase of a home and represents the equity, or personal financial stake, that you have in your home. A deposit, usually 3-5% of the purchase price, demonstrates your intent to follow through with a sale. The deposit money is held in the Listing Company's trust account until closing when it is applied towards the purchase price of the property and related costs. If during the period of time when an offer is still conditional, the Buyer backs out of the offer, the money is returned in full to them without any deductions.

How do we determine if the list price is fair?
This is where we, as your sales representatives, will look at the property's listing history and comparable recent sales to help assess true market value. Well maintained and properly priced homes sell quickly. Homes that idle on the market may indicate either a poorly maintained home or an overpriced property.

When putting in an offer on a house, how do I know what to offer?
Based on comparable recent sales and our extensive experience, as well as any other relevant factors such as competing offers, we will recommend an offer price that will protect your best interests.

When should I make my offer conditional?
A condition inserted into the offer means that the contract will not be firm and binding until certain things are fulfilled or waived (i.e. financing or home inspection). In a Seller's market, where there are more Buyers then available properties and multiple offers may be standard, a conditional offer will put you in a weaker negotiating position. However, if it is a stable or buyers market, conditional offers are very common.

How soon before I can move in?
Most closings take place within 30-60 days from the date of acceptance of the offer; however this can vary based on other factors. For example, vacant homes often require immediate closings. If you have a specific time restraint, please let us know so we can show you properties with closing that fit within your timeline.

Do I need a real estate lawyer?
Yes. Though the Agreement of Purchase and Sale and related documents may be standard, and of course we will explain all of their ramifications, your lawyer will need to search title for the property to ensure it is free from encumbrances.

What is title insurance?
Rights to real estate are not guaranteed. Fraud, forgery, title defects, survey problems, even human error, can delay; even prevent your home from closing. Title insurance insures against past problems that could affect your ownership in the future. A low, one-time premium covers you for loss or damage up to the policy amount and/or legal costs you would have to pay to defend your title. Once a policy is issued, a covered title problem is not your concern. The title insurance company will assume the risk.

Do I get a better deal if I buy a house being sold by the bank?
Sometimes homes are listed as 'Power of sale', which means the mortgage holder has obtained the right to sell the home and retain the proceeds when a mortgage is in default. These homes are listed at fair market value. The lending institution only has the right to retain the amount owing on the mortgage with the balance going to the owners who are in default. An additional factor to consider when looking at power of sale properties is that most are sold in an "as-is" condition and there is no opportunity to do a home inspection.

What are closing costs? How much should I put aside to cover these costs?
 
Closings costs are the costs associated with purchasing a home and include, but are not limited to:

1. Home inspection fee

2. Lawyer

3. Land Transfer Tax

4. Adjustments. On a resale home, adjustments consist of items already prepaid beyond the closing date by the seller that benefit the purchaser after the closing date, which are pro-rated, and a credit is given to the seller as an adjustment on closing. Some examples of closing adjustments on a resale home are for prepaid realty taxes, prepaid condominium fees (if the property purchased is a condominium), and fuel oil (if property has an oil furnace).

5. Fire insurance Mortgage lenders want you to protect your home - and their mortgage collateral - against fire and weather-related damage so it's necessary to purchase fire insurance.

6. Appraisal fee: The cost for a professional appraiser's opinion of the value of the property. Your mortgage lender will require an appraisal to determine whether the selling price is reasonable for that market.

7. HST: Only applicable on NEW home purchases over $400,000.

8. Mortgage default insurance: High-ratio mortgages (those with less than 20% down payment) require insurance against default. The cost is usually added to the mortgage, and ranges from 1.00% to 3.25% depending on the amount of your down payment. There is an additional 0.25% premium for variable rate mortgages.

9. Land survey fee (or title insurance in lieu): The lender usually requires a recent survey of the property or title insurance in lieu

We recommend you put aside 2-2.5% of the purchase price of you home aside for these costs.

How much Land Transfer Tax am I going to have to pay on my purchase?
 
Under the Land Transfer Tax Act, the Province of Ontario charges a tax to allow the transfer of all property purchased in Ontario. Land Transfer Tax payable on residential land is calculated as follows:

First $55,000 of the purchase price - 0.5%
Next $195,000 of the purchase price - 1.0%
Next $150,000 of the purchase price - 1.5%
Over $400,000 - 2.0%

A quick way to calculate Land Transfer Tax is to take 1% of the purchase price and subtract $275.00

I heard there is Land Transfer Tax rebate for first time homebuyers. How does that work?
As a first time home buyer, you can get a rebate of up to $2,000 but the following requirements must be met to qualify:

1. The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.

2. If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world, while he or she was the purchaser's spouse. If this is the case, no refund is available to either spouse.

3. The purchaser must be at least 18 years of age.

4. The application for a refund must be made within 18 months after the date on which the conveyance or disposition occurred.

5. The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.

6. The purchaser cannot have previously received an Ontario Home Ownership Savings Plan (OHOSP) based refund of land transfer tax.

What about HST?
HST is only applicable to service portions of a real estate transaction including home inspection fees, lawyer's fees, and commissions. There is NO HST on resale homes or new homes from a Builder under $400,000.

What is a home inspection and should I have one done?
A home inspection is a visual examination of the property to determine the overall condition of the home. A home inspection may indicate that the home needs major repairs which can be factored into your buying decision. A home inspection helps remove a number of unknowns and increases the likelihood of a successful purchase. You may or may not want to make the repairs and you can always adjust the selling price or contract terms if the problems are major.

What are the monthly costs of owning a home?
  • The Mortgage Payment: The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as mortgage term or amortization.
  • Property Taxes: Property tax can be paid in two ways - remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your financial institution; or paid as part of your monthly mortgage payment.
  • School Taxes: In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year.
  • Utilities: As a home owner, you'll be responsible for all utility bills including heating, gas, electricity, water, telephone and cable.
  • Maintenance and Upkeep: You will also have to cover the cost of painting, roof repairs, electrical and plumbing, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighbourhood and, depending on the kind of renovations you make could add to the worth of your property.

Do you really give away a car every year?
Yes! Whether you buy, sell or both, every transaction that is completed between January 1st and December 31st of a calendar year represents an eligible ballot to win a car. The car draw takes place in December and includes a complimentary dinner and secondary prizes. Commercial and residential leases, referrals, and new home sales are not eligible. Winners are responsible for taxes on the vehicle and must be present at the draw to participate.