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Biting the bullet: what you need to know to make an offer
A Straight Goods guide to purchasing a home in a booming market - Part 3
By: Pino Di Mascio
Prices are up and interest rates rising. With homes scarce and buyers plentiful, Canadians looking to buy a home in Canada's major cities face numerous challenges - particularly first-time purchasers. Straight Goods takes a four-part look at the often complicated home buying process. Pino Di Mascio and his wife Kelly O'Neill are searching for a home in downtown Toronto. In this series, the author shares insights and tips from his search for an affordable urban home. Previously, Straight Goods featured Part 1: Disentangling the home-buying process and Part 2: Immersed in the search for a perfect home. Here is Part 3.
Buying a home will likely be the most important and stressful financial decision of your life. After finding a house, you must prepare to make an offer, set conditions of sale, arrange a home inspection, get your mortgage approved and have a lawyer prepare the paperwork. The countless details can be overwhelming.
So where to begin? Well, it helps if you get prepared long before you're ready to sign on the dotted line. Before you are even ready to make an offer, you should:
Have your lawyer in place. Find one you are comfortable with and let them know that you are looking - the last thing you want is to be scrambling for a lawyer when you're ready to put your offer on the table. A reasonable fee is between $1,000 and $1,500, which should cover everything but the Land Transfer Tax. If you don't know where to start looking for a lawyer, the Canadian Lawyers Network (www.canadianlawyers.ca) is a network of progressive, independent lawyers with reasonable rates and high-quality service.
Have your Home Inspector in place. Again, you don't want to be scrambling. Get an idea of how busy they are and how much time they need for the inspection. A reasonable fee is between $200 and $300. Have a friend give you a reference.
Get your mortgage pre-approved from your bank and make sure they receive all the income verification or other paperwork they will eventually need. This will make the final approval much easier. Remember to insist on a discount of one-full percentage point off the posted rate. If they won't give it to you, someone else will. If you like on-line banking (and prefer a bank with a social conscience), Citizen's Bank of Canada (www.citizensbank.ca) will automatically give you the discount without any bargaining.
Now you're ready to make the offer and sign a Purchase Agreement. Take a deep breath. You will never be completely prepared for this. It's a big decision and there's a lot of money involved; the anxiety is normal. If you have followed the advice offered earlier in this series, then you have already established the maximum price and should be prepared to enter and exit a bidding war.
| Author Pino Di Mascio, his wife Kelly O'Neill and their dog Flynn, taking a break from their search for the perfect house |
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Having set your price, you need to understand the conditions attached to the Purchase Agreement. In a sellers' market, and with multiple offers, the conditions can be as much a determinant as price. You want to make your offer as attractive as possible (this might compensate for a slightly lower offer). In the current market you should set as few conditions as possible. Here are some tips:
Try not to haggle with the vendor's closing date. They've picked that date for a reason so try to please them.
Call your bank beforehand with all the details and make sure they will approve the mortgage amount. Removing the condition of financing gives you a large advantage. Vendors sometimes worry that the offer they accept will fall through, so give them a guarantee that it won't.
Don't remove the requirement for a home inspection. It's your best means of protection. If you are trying your best to get the house and want to make a truly clean offer (no conditions attached), then have the home inspection done beforehand. Just remember that, if you don't get the house, you're on the hook for that cost.
Have your lawyer review the Purchase Agreement before you submit it (there should be no extra legal fee for this). You want to be sure that you haven't minimized the conditions to the extent that you are no longer properly protected. Real estate agents may not think it is necessary but your lawyer will make sure all the details are fine, leaving you with the ability to concentrate on the bigger picture.
You're now ready to sign the agreement and have your agent present the offer. Good luck! And if you don't get the house, forget about it right away and keep searching. We recently "lost" a house that sold for tens of thousands of dollars over the asking price. As I've learned, it's a tough market out there.
Pino Di Mascio is an urban planner with Toronto-based international planning and design firm Urban Strategies Inc. He can be reached at pdimascio@urbanstrategies.com.
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