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Chapter 1- The Road to Real Estate Wealth Are you standard? This may be a question that you have never been asked before. It's offending in every way. Yet, throughout the process of buying a home professionals use words like standard forms, standard agreements and standard rates. You are not standard. Demand the best! Throughout HouseMasters Buyer Guide we intend to give you knowledge that helps you rise above the average Buyer. You should feel empowered after reading this guide to ask for certain clauses in your offer, the true meaning of representation and have the knowledge to walk away from a transaction if you are not being treated right. The theme of the book is to make people aware of the options that are available to them. HouseMasters goal is for no home buyer to feel remorseful, fearful or with a feeling that they were treated poorly during a real estate transaction. Many of the forms are taken from the Ontario Real Estate Association. The code of ethics references are taken from the Real Estate and Business Brokers Act (REBBA) and the Canadian Real Estate Association (CREA). These two bodies represent the guiding principles for trading Real Estate in Ontario and Canada. Almost all of the principles in this manual can be directly applied to any real estate transaction in North America and revolve around a home buyer being treated fairly. It has taken many years, many transactions and listening to buyers concerns, following the best real estate leaders we could find and finding the solutions for Buyers who need help. The sad fact is that this manual was created out of the public being misled, lied to and attitudes of indifference by “Professionals”. HouseMasters is here to help. When you're done with this manual, your knowledge base will be far greater than that of the “standard” home buyer. You will be fully charged with real estate information and ready to buy your next home.

Time to move forward.

What a Home Buyer Should Demand From a Professional?

Show up. There is nothing worse than a person who is working for you and can’t seem to make it on time or gives you a feeling of indifference. Under Promise and Over deliver- 100% is the new minimum. Receiving less than someone’s best means it’s time to move on. Stop The I’s and ME’s- It’s very hard to believe someone is thinking about your best interests with all their I’s and ME’s in their speech. Don’t Argue With Me- You may be right, but I’m the one with a cheque to write. High Ethics- This is shown with professional actions and not with amateur words Don’t Slander the Competition- What is your motive for putting down another professional? Is that your only way to get ahead? Be Creative- The best professionals always have options for people to choose. And, they’re not afraid to make decisive recommendations. Be Friendly- If people have a choice they will choose to do business with someone friendly. Be Assertive (when needed)- If I’m being taken advantage of buy others, don’t stand there and watch it happen. Don’t Ever Say to Me- Frankly, honestly, I mean that, truthfully and “it is what it is.” Put The Condescending Voice Away- I don’t buy a house every day, but take that childish tone out of your voice. Accept My Decisions- Don’t talk me out of my choices. Ask Permission- Don’t just call or email me. If we work together, ask me if I want level of communication is best for me.

Don’t make constant withdrawals from my trust account! Further on in this manual you will learn the signs that a professional may need to be let go. And, the steps you can take when dealing with a Real Estate Agent to help protect yourself.

What a Professional Should Want From a Buyer The Truth- A dedicated professional will make efforts to reach your success. Don’t work against them. Return My Email or Phone Call- If the sales person is working for you, just respond to them or tell them that they don’t have to work for you anymore; Simple Correct Me if I’m Off the Mark- If you feel you’re not getting the right questions answered stop and clarify. Don’t let me waste everyone’s time. Make a Decision- You know what you want. You know who you want to work with. Say it. Be On Time- Have the courtesy to show up. Tell Me if There is Someone Else in the Decision- Let me off the magical mystery tour if you’re not really the one making the decisions. Keep it Business- I’m trying to sell your house! Don’t ask me to feed your cat when you go out of town. Don’t Lie About Signing Contracts With Others- You know when you signed a contract with someone else. Why lie about it? You will end up in front of a judge explaining your lies. Let Me Bring My Value to You- If you don’t think I’m better than the rest, fire me. Don’t Blame Me For Everything- If you lose out on a house because you wanted to think about it, don’t tell me I did something wrong. This is a relationship killer. Don’t Paint Me With the Same Brush- There have are dishonest people in every industry. But please, take off your white wig until you get to know me. Here’s a chart that can help when meeting with professionals during the buying process. Give each professional a ranking from 1-10 to see if their right for you. Professionals Name

First Impression

Knowledge Base





Total Score

Chapter 2- The Art of Borrowing What the Bank Wants You to Think The Bank wants you to think that you own your house; You don't. If you have a mortgage on a property what you have is an asset in waiting until you fulfill your financial obligations to the bank. The only way to get ahead of the banks is by not paying them a penny of interest. This creates a problem for someone that has just taken out a mortgage for themselves. How can anyone pay off hundreds of thousands of dollars that fast? Well you can't do it immediately, but what you can do is create a re-payment schedule that would see you putting extra money aside every month and paying your mortgage on an accelerated by-weekly basis. In essence, you're attacking that debt with everything you can throw at it to earn your asset faster and lower your principle owing. Lower the principle faster= less interest paid in the long run. See diagram 2.1 for examples of how prepayments can help you eliminate your mortgage faster. When it's all said and done, you need the banks and they know it.

Getting Your Financials in Order Before you even entertain the idea of going to look at a home to buy, visit your lender. You have to know some basic information; such as: 1. Do I even qualify for the mortgage I want? 2. What is my credit like? Is there something from the past I don't even know about giving me a bad name. Has someone stolen my identity! What history do I have that makes me worthy of a lender giving me hundreds of thousands of dollars? 3. At the current lending rates, what will I owe every month on my mortgage? Does that number work with my lifestyle? And, if that rate rises in a short amount of time, how does that effect my comfort level? 4. While you’re negotiating a mortgage you should try and lower credit card rates, ask for lines of credit and roll in any other debts that are a pain. Negotiate with the bank when you're wealthy.

Big Point- Banks posted rates are not their best rates they can offer!

Do some searching online to find better

information on the current discounted rates. It is sickening to think that someone can walk in off the street after saving for their new home and get locked into a mortgage rate that is 1.5% higher then the next person because they didn't know a lower rate was available and the banker wasn't offering it up.

If you’re a first time buyer, your down payment can come from different sources like:   

Your hard work and savings A gift from someone. This is explained to the lender is what is called a “gift letter” Your RRSP’s. This is a program for first time buyers. You can borrow up to $20,000 from your RRSP contributions and you must repay the money over the next 15 years.

Qualifications for a Mortgage Your lender of choice will begin asking you a series of questions to figure out if you qualify for a mortgage. Some of the important items are: 1. Where you are currently employed? 2. How long have you worked there? 3. What are your current debts compared to your income? See mortgage qualification later in the chapter for information on this calculation. 4. What is your social insurance number for a credit check? After the income vs. debt ratios are figured out, the bank will be interested in seeing if adding the new mortgage payment will hurt the chances of re-payment. Specifically, for every $1.00 dollar that you earn, is .60c going in your pocket? This would leave .40c going to your bills. Take this information seriously. If you are keeping .75c of every dollar now but with a your new house purchase that .75c will be reduced to .61c that might be a huge lifestyle change. Just barely qualifying now does not give room for interest rate ajustments in the future. A new mortgage has to be a comfortable feeling. That's why a lender telling you that you can afford a $400,000 mortgage is great, but the better explanation would be, here are the monthly payments for that size a mortgage. After all the numbers are added up you can see if you’re going to be having food with your meals.

Don't Forget- You now have property taxes to pay now as well. Taxes have a terrible history of going up and not down.

Banks vs. Mortgage Brokers Most people start with the bank they deal with every day for applying for a mortgage for two reasons; 1. Your own bank should be willing to give current customers their best rates. 2. Comfort and ease. Then you can see where you stand with your bank and when they don't give you their best rates that you deserve you can tell them that you will be shopping around. After visiting your current bank, a great second option is a Mortgage Broker. A broker works for a large number of lenders compared to a bank that only works for themselves. There are stories of Buyers that have gone to their current bank and been given a poor rate only to go to a Mortgage Broker who has achieved a lower interest rate with that same bank. Banks have made adjustments on how they do business that have made them more

competitive against brokers. But, as long as the bank is working for themselves and a Broker can be working for as many as 40 lenders, it will be hard to compete.

Big Point-

Don’t go from lender to lender applying for mortgages. Every time someone looks into your credit score, it can affect the score negatively. Apply at two lenders= ok. Apply at 10= ten people looking into you . Proceed like this: First, ask for the credit score number from the first Lender you go to get pre-approved. Second, shop around for Lenders but when it comes time to apply, go through the qualification process but do not let them do a credit check . Third, if there is no signed offer to purchase the lender can’t do anything else mortgage wise for you at that time. Lastly, when you do offer at a property, if the Lender you choose is not the first Lender who did the original credit check, another credit check will be done before approval is given. This credit check is part of the process and no Lender is just going to take you at your word that your score is what you say it is.

Next Big Point- Tell the Lenders you’re shopping around.

Challenge them into offering you their best rate they

can give in the beginning.

Last Big Point- You can get locked into an interest rate for 120 days.

So, don’t feel as if you have to go and buy

a property that day to get the rate you were promised.

Mortgage Qualification Steps After questions about your employment are asked the next step is to crunch the numbers. The two calculations in the qualification process are Gross Debt Service (GDS) and Total Debt Service (TDS). This formula combines the applicants before tax monthly income vs. monthly debts. Here is an example for clarity: Gross income= $75,000 yr./ 12 months = $6250/ month GDS ratio= 32%- So take $6250 x .32 = $2000 TDS Ratio= 40%- So take $6250 x .40 = $2500

Therefore: The GDS ratio represents a total of $2000 you can spend on mortgage payment, taxes, heating cost, condo fees (if applicable) per month. These are all home related payments. You can spend up to $2500 a month on your mortgage, taxes, heating cost, condo fees (if applicable) and also credit card payments, car payments, alimony or other loans. This encompasses all your monthly payments. As long as you choose a home that makes your house related payments less than $2000 in you qualify. And, as long as you choose a home that will not push your total household payments and credit card payments per month over $2500 you will qualify. If you approach this step with an open mind you can use the information as leverage to put in a better position. Once pre-approved your Lender will be able to hold the interest rate you qualified at for. If your rate goes down then you’re automatically locked into the lower rate. Enter your numbers on the diagram below to check your qualification numbers.

Selecting a Mortgage Product Buy now your lender should have a firm grasp on your plans with your next home. This should include information like how long you want to live there, the improvements you want to do to the property and any other financial options that could be offered to you. All Mortgage Professionals refer to mortgages as “products�. This is because they all have different characteristics. One mortgage may be open and have unlimited prepayment options. Another may have a large penalty if you have to break the mortgage term. Also, within the mortgage terms will be the penalty for not meeting your payment obligations. Cash back mortgages are also popular with buyers with just enough money for a down payment but improvements are needed right away. The point here is that there are many mortgage types to consider and you need to know what you want to get the correct mortgage for you.

Major Point- Remember that on the surface a mortgage may look like a big number and an interest rate. details are so important to understand and need to be explained. Life changes, circumstances change and employment changes faster than you think; Know your mortgage.

Mortgage Qualification Calculations GDS Formula (Gross Debt Service) Your Gross monthly income $ ______________ this is your pre-taxed income per month Your Gross monthly income $_______________ X .32% = $______________ or Your GDS number My current monthly household related bills are: 1. 2. 3. 4. 5.

$__________Mortgage $__________Taxes $__________Heating Costs $__________Condo Fee $__________Other

My GDS number:


Minus Total Household debts: $______________

Total $______________ Total Household Debts $_____________

*the Total must be above $0 for the bank to qualify you for the mortgage amount requested.


TDS Formula (Total Debt Service) Your Gross monthly income $ _____________ this is your pre-taxed income per month Your Gross monthly income $______________ X .40 = $______________ or Your TDS number

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

____________________Mortgage ____________________Taxes ____________________Heating Costs ___________________ Condo Fees ___________________ Other Household ___________________ Car Payment ___________________ Credit Card Payment ___________________ Other Loans ___________________ Alimony ___________________ L.O.C. Min Payment ___________________ Other Payments

Total Monthly Payments= $_______________

My TDS Number $______________ Total Monthly Payments $______________

*the total must be above $0 for the bank to qualify you for the mortgage amount requested. Or there is enough money there to pay all the bills and a new mortgage payment. *Remember, all of your debt payments and are based on minimum payments for those debts.

So What Does All This Math Translate too? You now know how much you can afford each month for property related expenses. If the number that was established for mortgage was $1500 based on house hold debts you may be wondering what that means for the maximum purchase price of your home search? Here’s where it comes together. For this example, we will use $1500 as your maximum mortgage payments, spread over 25 years, based on house hold debts and assuming that the Buyer has good credit: $1500 @ 3% interest rate means your maximum purchase price is- $317,000 $1500 @ 4% interest rate means your maximum purchase price is- $285,000 $1500 @ 5% interest rate means your maximum purchase price is- $257,000

Re-Payment Schedule by the Numbers This an example of a $300,000 mortgage @ 5% interest that changes greatly when you alter your repayment habits. The graphs will show re-payment difference when you introduce small prepayments and one time yearly payments.

This is a 25yr mortgage payment graph based on a monthly payment schedule. The cost of Borrowing with principle and interest is $502,438 over 25yrs.

The same 25yr. mortgage but with bi-weekly payments of $872 that shorten the life of the mortgage by 2.7 years and save you approximately $37,302 in interest.

By increasing your bi-weekly payment by $50 to $992 and paying an additional lump sum of $1000 annually you shorten the length of the mortgage to 16.5 years and save $46,895 in interest.

A Helpful Chart to Estimate Your Mortgage Payment Take the number of $1000’s you want to borrow and multiple by the factor in the chart. A $300,000 mortgage = 300 1000’s ($300,000) borrowed. Now take the 300 number and multiply it by the 4.5% interest rate factor under 25 years. You will get a number of $1659.00 as your mortgage Annual Interest Rate 3% 3.5% 4% 4.5% 5% 5.5%

Amortization Period in Years + Payment Factors 10 Years 20 Years 25 Years 9.65 5.54 4.73 9.88 5.79 4.99 10.11 6.04 5.26 10.34 6.30 5.53 10.58 6.57 5.82 10.82 6.84 6.10

Always speak with a mortgage specialist when discussing the details of your mortgage! There are other factors that will alter these payment factors; mainly credit history. Also, most banks offer to prepay your property taxes for the year too. This will affect your payments as well. They should advise you on your down payment to avoid mortgage insurance premiums as well. If you can put a down payment of 20% of the purchase price you can avoid paying a small premium on your mortgage. This premium is small but will affect the amount you can borrow.

Notes: __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________

Chapter 3- Starting to Look for Your Home To this point, you will have done the mortgage qualification and are ready to go shopping. But, how are you going to start looking? Are you going to check open houses, MLS websites, brokerages sites, For sale by Owner sites or go social and announce via Facebook to your network that you're looking to buy? The smartest way to them all. If you decide that you want to work with a Realtor to find your next home (and you should. More on this to come...) a popular method is to interview three different professionals and try and choose one. This is a good method but there is one other way to find a Realtor that operates on a higher level of trust; the referral. A referral from someone you trust is the best way to find a professional that has worked for someone you know and has provided enough value to earn the privilege of passing of their name to you. A past client referring a Realtor's name to a peer is the ultimate goal of any Real Estate Professional and should be the basis for their business. Much like a great restaurant or mechanic, a Realtor must provide their client with an amazing experience to earn this referral. Nothing less than amazing will do. Average service in the Real Estate world sucks. Don't follow a sucker. When you find a referral to a Realtor, some good background information could be helpful in finding out more about the person. Ask questions and Google everything you can about the agent. Some good questions could are: 1. Has the person ever been convicted of an offense by your governing body of Real Estate? I say convicted because there are many types of people with different motivations and all types of misunderstandings. This does not mean that the Real Estate Professional did something incorrect. If the system has found the Realtor not guilty of any wrong doing that should not be something to hold against a professional. Guilty- Big difference. Go to the governing bodies’ website and check under the discipline section. All of their convictions should be there. 2. How long have you been a registered Real Estate Agent? 3. How many transactions have you been a part of in the last 12 months? 4. Do you have a team of people behind you? This can also be a good way to find out if once the you start working with someone, how often will I hear from you? 5. Do you have any references? 6. What are some of the biggest mistakes Buyers make when buying property? This question requires the agent to think and give an opinion on a situation you’re about to enter. This could show you how intelligent the person is and insight into their experience. 7. What level of communication can I expect from you after I hire you? Use Google, Facebook, Twitter, LinkedIn to find these agents! Use these information platforms to find out as much information about the Realtor as possible. If they're hard to find on something as massive as the internet then how recognized in your local community are they going to be? Plus, if they are active in social circles, it's a good chance to see what they are all about and some of the value they offer.

Also you could call the Broker of Record for the Brokerage. Why is this? You may think you may be working with sales person but you will be signing contracts with the Brokerage. Every Brokerage has a Broker of Record who oversees their agents and is responsible for their actions. Call and get a "gut feeling" on the Broker of Record as they will be the one you will speak to if you have a problem. Do not ask about the sales person at first. Of course they will spew good comments about their own employee if asked. At the same time you’re finding a Realtor, find a legal referral. Not all lawyers are created equal either. If you find a lawyer you like ask them about agents and brokerages. They might be able to tell you there opinion on a Brokerage and if they have had any legal proceedings with them. If you take these steps you should be able to find someone you feel comfortable with. This will get you started...but there is long way to go. You may have found a Realtor but, it’s getting close to the time you need to protect yourself.

BIG Buyers Protection Point There is wording in the Ontario Code of Ethics and others like it in Canada that states: “A REALTOR® shall fully disclose in writing to, and is advised to seek written acknowledgement from, his or her Clients and those Customers who are not represented by other Registrants regarding the role and nature of the service the REALTOR® will be providing. This disclosure shall be made at the earliest possible opportunity and in any event prior to the REALTOR® providing professional services which go beyond providing information as a result of incidental contact by a consumer.”

To some Brokerages/Salespeople this is translates to: Before I answer any questions, show a buyer a property they must commit in writing to buying a home from this brokerage (which really means, buy a property with me representing you). Before I do anything, you will lock yourself into a contract with this brokerage/me.

THE SOLUTION- Ask the Realtor one question; does your brokerage have a policy that a representation agreement or service agreement be signed before any information is given or homes are viewed? If the answer is no, the Agent is trying to enforce a personal business policy on you. If the answer is yes, then that means you will have to lock yourself into a contract with that company before you see a property with their representative; all because you called to ask about a home. Run away from these policies by individuals or brokerages. There are many hard working agents that will be happy to provide enough value so that when the time comes to talk about signing a Buyer Representation Contract they will be

happy to sign. If a decision is important and needs to be decided now, the answer should be no until you have enough time to consider the information. To be clear, real estate professionals do not need to work for free. Do you work for free? You don’t, so don’t expect others to do this. However, when you bought a car, did you test drive it, ask questions and think about if the car was right for you? Or did the sales person make you commit to a vehicle before you did the normal diligence of buying a car? The disclosure this clause speaks to is an information brochure that every agent must be give clients and customers. It is not a written commitment to that person or brokerage. My point here is obvious. Agents and brokerages can try to sell you on committing to them but you don’t have to buy what their selling. You can put icing on a heap of manure, but it’s still a pile of….you know.

Viewing Houses If there was one thing that you could do from the beginning of your house search that could make your search much worse, this would be it; looking for a home with no critical assessment as to what you’re looking for. To quote Earl Nightingale's famous recording “The Strangest Secret”; "take a boat with a captain and crew on it and send it out of the harbor 999/1000 it will reach its destination. Now, take the same boat and take the captain and crew off the boat and you will agree that it would be lucky if the boat ever left the harbor.“ The same can be said for someone looking for a home with no plan. Start with your needs vs. wants. A need is a list of items in your home that are not negotiable. Wants are items which are negotiable. For example, if you have a small family, then maybe three bedrooms are not negotiable. On the other hand, if you have that same small family maybe hardwood floors would be nice but the bedrooms are more important. This step may seem simple and obvious but it will save you time and money so make sure you do it. Time is your best friend or your worst enemy in this game. Repeat and underline the last sentence. Fill in the chart in the next page to help you decide what is most important to you. Now that you have your important items decided on, ask your Realtor to insert this information into an email program that can email you MLS properties as soon as they hit the market. Very important! The email program will give you the best chance to see the property as soon as it hits the market. HouseMasters has this email system available too but with private sellers as well to give you a full scope of the market.

Needs vs. Wants Chart Areas for Consideration: ex. Downtown, North end… 1234-

Number of Bedrooms: Styles of Homes to Consider: Most Important Amenities: Earliest Date for Completion:

Number of Bathrooms:

Latest Date for Completion:

My most important features in a home are: 1. 2. 3. 4. 5. 6.

7. 8. 9. 10. 11. 12.

Concluding Statement- Bring it All Together “If I could find a _________ style of home with ______ bedrooms, ______ bathrooms near ___________, ___________, _________ by _________, 20___ I would buy this property. The most important features in my next home will be: _____________________________________________________________________________________ _____________________________________________________________________________________

The Beginning of the Search To start, choose your top 5 best homes that you think fit your criteria. They should have been sent to you by your Realtor’s email program. You never want to look at more than 5 homes at a time unless there are time constraints like a buyer being from out of town. The reason for this is so that you can take in the top homes you chose and remember all you like and dislike about them. Try viewing a large group of homes in a day and you will understand what I'm talking about. You will have trouble remembering what you saw at the first property by the end.

Big Clue- In the beginning of the search, after taking three steps into the home and immediately walking out deciding the home does not work for you, your goals have not been clearly defined to start searching; reassess and start again.

Another Big Clue- If you see a home on the internet and the home has 7 pictures of the back yard with none of the inside...steer clear or at least ask if there are some pictures available via your Realtor; Scary. After you have seen your five favorite homes, have a little meeting with yourself and ask, did those properties come close to my wish list? If you walked in and out of all five, make it a closed door meeting with yourself and return to your wants vs. needs list for re-evaluation. Once you consider the first five properties and realize they're close to your wants, if available, go after your next five closest properties within 72 hours of the first five. This will keep your search active and give you a really good idea if what you’re looking for is out there. If the property is not out there, you have now seen 10 homes and you will have a redefined idea of value and what your budget can achieve.

Becoming a Market Expert To this point you have figured out your needs and are viewing property. You’re entering the Real Estate world and becoming educated fast. After you start to see homes you will begin to start making statements like, "remember the last house we looked at? It had ________" or "how can this property be this price, when the other property we looked at had ________, ________ and ________.” You are becoming educated fast on value in a neighborhood. Your Realtor can start you on the right track by providing you with market sales data in the area. This is good knowledge to have. When you start to compare properties you are becoming a value expert on what type of property can be purchased for what amount of money. Your Agent should have enough knowledge of any neighborhood to give feedback and recommendations. If there is one neighborhood that is more intriguing to you than others, ask your Agent to produce a CMA of the current listings and sales from the last 6 months. As well, a report that gives you an average return of the last 5 years. This is an investment, so check the level of returns in the area. The real estate market is an invisible force. Having a report on paper can help your decision for investing in an area.

You Found One! This is where you need to be careful. The correct thing to do is to revert back to the original or revised wants vs. needs list. Go over this list and see if it really fits your needs. It’s about this time that a Professional Real Estate Agent will separate themselves from a salesman.

Major Point- A Real Estate Professional is a business person looking to build a long term relationship and help propel their clients to sound investments that will generate Real Estate Wealth over time. A Salesperson wants to sell you something today to make a commission. The easiest thing for me to say now that you have found your dream home is to go get it! But, this may be your first home and buying a home and buying a home early in your search can be scary even if the house is perfect. If you have been instructed correctly by your Real Estate Professionals than you should be ready. If you don't feel like you have all the confidence in the world to go forward than stop immediately. If you don't have all the confidence in the world in your Realtor by now, stop immediately; and tell them that! You should be respected for this and hopefully you can work through the issues and move forward. If not, then it could be time to move on to another agent. The next chapter deals with understanding the paperwork needed for a successful transaction. As well, we will talk about the legal issues you must understand to feel comfortable with. You will need a firm grasp on these concepts to protect yourself.

Notes: __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________

Chapter 4- The Paper Trail to Purchasing a Home Creating an Offer with a Realtor This is the time you've been waiting for. The Bank has told you your money is good, you've qualified the home with your needs list and you want to make an offer to the Sellers. The time for you to protect yourselves is now. Be very careful when signing an offer to purchase and all of the accompanying documents.

The Paperwork Trail to Purchasing a Home Before an offer to purchase is signed, the relationship you have with your agent needs to be clear. As a Buyer, defining a relationship, in writing, is established with 3 documents: 1. An information style document explaining the different types of real estate relationships and duties owed through a being a client or a customer of a brokerage (very important). 2. A Buyer Representation Agreement to become a client of the brokerage or Customer Service Agreement to be helped out as a customer of a brokerage. 3. The Confirmation of Representation document which accompanies an offer. I know you’re not dating your Real Estate Agent and the word “relationship” may sound odd. However, these steps and terms have been put in place through years of lawsuits, court proceedings and misrepresentations. It is very important that these steps are taken. As we explain the documents you will begin to see the importance of these steps.

Buyers Protection Point If you’re in a rushed situation to make an offer at a property, do not let an Agent tell you that you can “do the paperwork” after the offer to purchase is made. By a Realtor completing an offer to help you buy a property without taking the time to explain the types of real estate relationships you could be making an implied client relationship. If you disagree that you’re working with an agent, someone looking at the situation could ask you, how are you not working with the person if you asked them to make an offer at property on your behalf? If the actions you ask someone to do walks like a duck and quacks like a duck, legally you could be involved with a Duck. If you decide not to proceed you may be in for a shock when it’s determined that you made a choice to work with them, even though you did not sign a contract. The Realtor might have broken a rule but the legal slope is slippery when it comes to creating a client relationship. Therefore, all paperwork must be signed prior to completing an offer!

Document #1- Understanding Real Estate Relationships If your entering into a real estate transaction using a professional Realtor it is clear in most codes of ethics that a document stating the types of relationships and services a brokerage can offer be completed prior to an offer being signed; No exceptions. If you're a Buyer what does this mean? It means that there are real estate terms that need to be understood by the Buyers before an offer can move forward. Note the bolded items in the explanation. The details of the real estate relationships document are:

Brokerage- This is the real estate company that a Salesperson works for and along with the agent will be providing customer services or representation to a Buyer. Client- This is a person who is represented by the brokerage. To be a client a Buyer Representation Agreement is signed by the Buyers. Customer- This is a person receiving Real Estate Services through the brokerage. To receive real estate services a customer service agreement is signed. Duties Owed to a Client: A person who is the client of a brokerage can expect accounting, competence, confidentiality, good faith/full discloser, loyalty and obedience. A client receives these duties in exchange for their commitment to buying a home exclusively through a brokerage. Duties Owed to a Customer- A Buyer that is a Customer of the brokerage must be treated fairly, honestly, and with integrity. Multiple Representation- A situation where one brokerage will represent both the Buyers and Sellers in the same transaction. This type of transaction must be agreed to in writing by the Clients (not the customers) involved with the transaction. The brokerage cannot disclose the personal information, motivations or financials of any Client in the transactions.

This document will also speak to the fact that the brokerage can provide customer service to more than one customer. As well, a brokerage can represent Clients and still provide services to more than one customer in the same real estate transaction. Is this Confusing? As you can see there are many parts we have highlighted as there is a clear difference between a client and a customer. Those differences are itemized below. At the bottom of the relationship document you will be asked to sign and state that you understand everything you just read and that you're ok to proceed. Do you understand all this?

STOP- The Ontario Working with A Realtor version of understanding relationships form below, states under the acknowledgement section they’re two choices for a Buyer to choose from and initial that: #1. That as a Buyer Client your interests are being represented. Or #2: The Buyer is a Customer and that the brokerage is "not representing my interests" and further that it will be documented in a service agreement that your interests are not being represented. Does this give you a comfortable feeling to move forward with a brokerage that says we will not be representing you in the biggest purchase of our life?

The Ontario Working with A Realtor Brochure:

Understand the difference between a client and a customer? When you have the knowledge of what customers and clients are legally owed, you can go forward to make an informed decision on which type of representation is best for you.

What Are Services and Customer Service? Types of services a Buyer receives from a Real Estate Agent are information about the property, answers to questions about the home, meeting a Buyer at an appointment and, when necessary, facilitating the paperwork for a transaction in Real Estate. Someone receiving services is to be treated fairly, honestly and with integrity. The Real Estate and Business Brokers Act states under section 3 that anyone, customers and clients, participating in a real estate transaction is to be “treated fairly, honestly and with integrity”. The act also states in section 4 that a Registrant (Realtor) will also "promote and protect the best interests of their clients." Someone receiving services is NOT A CLIENT and your best interests will not be promoted or protected. But you will be treated fairly…. So, as a customer, you’re owed “fairness” and “honesty” expected by law from a Realtor/Brokerage that you have signed a customer service agreement with. If you have ever bought a T.V. from an electronics store you have been given customer service. Does the Salesperson work for you or the electronics store? They're merely the gatekeeper to provide you with information to make a choice on which T.V. to buy. If there is a problem with the T.V. can you bring legal action against the salesperson? You can try. If you have a problem with your home can you bring legal action against the Realtor that gave you customer service? You can try, but remember, you signed a customer service agreement as well as a relationship form that stated the Brokerage does NOT represent your interests and you fully understand this fact. Unless you can prove that you were treated unfairly and without integrity it might be a long and costly journey with a poor result.

Major Point- A client is far more dangerous to a Brokerage than a customer. When it comes to legal obligations a client is owed far more duties than a customer.

What is Buyer Client Representation? A Buyer Client of a brokerage is the highest form of representation available in buying Real Estate through a brokerage. The list of duties to a client from above were: accounting, competence, confidentiality, good faith/full discloser, loyalty and obedience. From these points you will notice that confidentiality is one of the duties. This is a fundamental duty to a Client. If something is told by a client to Salesperson that information is to be kept in strict confidence; all information. The information that cannot be disclosed to anyone from a Realtor representing a client is documented in the Buyer Representation Agreement as: 

the Buyers motivation to purchase a property

The price a Buyer will pay for a property

the terms of another offer that the buyer may have offered to another property

Big Question: If a Client receives the privilege of confidentiality, loyalty and all the other duties owed to a Client, is it fair to say that the opposite must be true when talking about the obligations owed to a Customer? Yes. This is the key point of this section as I’m sure you know by now.

Big Point- A Realtor who has a client in a Real Estate transaction cannot attempt to create another client relationship with someone else in the same transaction. Simply, a Realtor cannot have two clients on purpose. This seems obvious, but unfortunately it still happens all the time. Example, the Salesperson has listed the property and a Buyer calls to see the property. The Buyer wants to offer at the property. The Listing Agent cannot ask the Buyer at that point to sign a Buyer Representation Contract. THEY ALREADY HAVE A CLIENT= THE SELLERS

Document #2- The Buyer Representation Agreement, The Customer Service Agreement and the Differences Between these Documents In the last section we explained what duties you’re owed as a Client and as a Customer. Now we will look at the two documents that legally decide whether you are a Client or a Customer. Here are the difference with the advantages and disadvantages of both documents.

Buyer Representation Agreement (B.R.A.)

Brief Description:

The Document has a specific start and end date and can be any length of time. * For a contract longer than six months in some jurisdictions a Buyer must agree to this by acknowledging this on the document. It States clearly the buyer is giving, ”exclusive and irrevocable authority" to the brokerage to act for buyer. Translation- there is no going back for a buyer once they sign the document and they’re committed to that brokerage for their real estate purchase for the agreed to time period. The B.R.A gives a general description for locating the property a Buyer wants to Purchase. The document refers to "use" and "geographic location" as two of the factors a Buyer will use for selecting the property they will be buying * Important! More on this in chapter 5. A commission section is included in a B.R.A. If a property is listed with another brokerage there will be a commission paid to the Buyer’s Representative from the Sellers. This can range from $1.00 to a percent of the purchase price usually between 1.5 to 3% of the final purchase price. Although

there is a commission paid to the Buyer’s Representative by the Sellers, it is the Buyers responsibility to make sure the Agent acting for them is paid the amount under section 2 of the Buyer Representation agreement. This is a huge point that is rarely explained correctly. See the wording from the Ontario Buyer Representation agreement below. Much More to come on this major point....

You're signing the agreement with the Brokerage and not the individual.

Benefits: 

You have the full power of a brokerage to represent you with years of experience

As a Client, You have a strong legal recourse if you feel like you can prove you have been misrepresented by your brokerage.

The Realtor signing the B.R.A is required to be full insured and signs to this fact on the document. If an error happens during the transaction a Buyer may bring a lawsuit against the Agent and brokerage.

If you choose the right Professional than you have a qualified negotiator that is dedicated to working in your best interests.

Buyer Customer Service Agreement Brief Description: 

This document has a starting point and an end point.

There is a general description of the property that a Buyer is searching for by use and geographic region; the same as a Buyer Representation Agreement.

For the commission portion, there is no obligation for the Buyer to pay a commission to the Realtor for giving customer service. Here is the actual wording from the Ontario version of a Customer Service Agreement.

A buyer is warranting when they sign a customer service agreement that they have not signed a Buyer Representation Agreement with another brokerage.

There is a spot on the document for the Agent to state they’re fully insured

Benefits 

The document does not obligate you to a brokerage

You are not obligated to work with one agent.

The document serves its purpose for a Buyer to purchase real estate

The Realtor still has to sign that they're fully insured

It provides much less legal recourse compared to a Buyer Representation Agreement for poor representation and far less legal obligations are owed to the Buyer

As you can see there are many advantages and disadvantages to signing either of these documents. The main reason for a Buyer choosing to sign one of these documents is should be comfort. If you're a Buyer and you want to have a person represent you then go ahead and sign a Representation agreement with the Agent. If you do not want an obligation or feel that you are not comfortable with the person, do not sign a representation agreement. If you do sign a Buyer Representation Agreement and things are not working out, tell the agent that you would like to change agents with someone else in their brokerage. The contract is with the Brokerage and not the agent. The Agent could give you some grief over this and at that point you should call the Brokerage and ask to speak to the Broker of Record. Most Brokerages have a number of Agents that can help you. The Broker of Record will refer your name to another Agent or you can interview different Agents to help you. The Broker of Record will be loyal to their agents so be ready to take it to the next level if they refuse to change Agents for you.

Remember that you control how you want to be represented and not the Agent. You can make an informed choice as which document you will sign. Too often the Agent believes they choose what kind of Buyer you will be. You’re smarter than the average Buyer now, so use this knowledge to look out for your best interests.

Document #3- The Confirmation of Representation The confirmation of Representation document is a summary of the previous two documents. Normally, this document will be signed at the time of the offer to purchase. The document should be the first page of every offer to purchase and states: 1. How the Sellers are being represented and by whom. 2. If there is a Buyer Representative working for the Buyer it states the Brokerage and the Representatives Name. 3 The document states the amount of commission being paid to the Buyers Representative. The Sellers agreed to pay this fee at the start of their listing. * big point to come on this one 4. Any additional comments or declarations by the Listing Brokerage. 5. Any additional comments by the Brokerage representing the Buyers .

This document is placed in front of all the parties to "confirm" that they understand how they are being represented and how the commission for the transaction will be handled. Also, either party can place a disclosure into the confirmation of representation that they feel needs to be “placed on the table" for all to know. An example of this might be that a representative is related to their client. For some, the knowledge of any deaths in the property is one of great importance and represents a physiological defect. This could be the time to insert this fact. Really, it is anything you want to say so that when the deal is done nobody can say, “I didn't know”. There are so many communication options for creating a proper paper trail (fax, email, text, Facebook, Twitter, documents) in this era of Real Estate that the words, “I didn’t know” or “you said” should never be uttered in a transaction.

Buyers Protection Points Big Point- As a Buyer, make sure that the commission indicated on your offers Confirmation of Cooperation is not less than your Buyer Representation Agreements commission! You will see the amount of commission being offered by the Sellers (example 2% of the sale price) on the Confirmation. And, if the amount of commission being offered by the Sellers is less then amount of commission your B.R.A. states (3% of the sale price), the Buyer will be the one that makes up the 1% difference owing to your Buyer their Agent.

Here is the section on the confirmation where the commission offered by the Sellers will appear:

And this was the wording in the B.R.A. about your Buyer Agents obligation to tell you about the commission offered by the Sellers.

Bigger Point-

If an Agent has stated on the Confirmation of Representation the commission for

the Buyers Representative is “the commission indicated on the MLS agreement”, ask your agent what is the actual commission on the MLS agreement they’re being paid? As you can see from the high-lighted text above, the Buyer’s Agent must tell you what the Sellers are offering for a Commission a Buyer’s Agents. If your B.R.A states that the commission payable to your agent will be “the commission indicated in the MLS agreement” then you will not owe any extra commission. However, if the B.R.A. has 3% owing and the “MLS agreement on the property” has a commission offered for a Buyer’s Agent is 2%, the buyer will owe their Agent the 1% difference. Here is breakdown of how much the Buyers could owe their Agent thousands: $400,000 Purchase Price Sellers offer a commission of 2% of the purchase price = $8000 commission to the Buyer’s Agent The Buyers have signed a B.R.A. that states their Buyers Agent is entitled to a commission of 3% of the purchase price of any home they purchase; this would be = $12000 owing to the Buyer Agent in this case This situation has a $4000 difference in commission from what is being offer to what the Buyers B.R.A. states the Agent will Receiver. This means the Buyers will owe this money to their Agent on closing.

ALWAYS- On a B.R.A.’s commission section, make the agent insert that they will be paid what is being offered by the “MLS agreement.” Do not let them write in a percent of the sale price or a dollar amount like $10000. If they don’t want to do as you ask, don’t sign the agreement and fire them. If you follow this step you, as a Buyer, will never have to pay your Agent extra commissions. All of their payment will come from the Sellers at the MLS agreed to rate.

To Conclude Another point to remember, is that an Agent cannot discriminate against which properties they show you. If you would like to see a property and the commission offered is not appealing to your Agent, they have no choice. Once you inform them that you have a property to see that you‘re interested in the Agent has an obligation to attempt to show you the property. This also includes Private Sellers homes as well. Email is the best paper trail to show your interest in viewing a property… Money is always the most contentious point of buying a home. Don’t let an Agent bully you into signing any document until it’s understood. The best real estate transactions are a “win-win” situation for Buyers, Sellers and Agents. To many times the Agents involved can get in the way of people doing business. These are people acting out of desperation and not inspiration. We hope this section saves every Buyer time and money.

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Chapter 5- Buyer Representation Situations and Solutions to Common Issues The following situations happen to Buyers every day. They happen to all types of Buyers and all types of transactions. Basic human nature says that nobody will hold your interests higher than yourself. With these examples you will see how you can take control of any Buyer situation just by knowing your options.

Situation #1: A Buyer wants to buy a home they viewed from an open house. This can be an overwhelming time for a Buyer. They walk into a house, fall in love with it , they see other Buyers and make a choice to offer at the property. If they have an agent they can go to them to write up the offer. But, sometimes the buyers are not working with an agent yet. Then it happens; the listing agent offers to write up the offer for the Buyers. The Buyers just met this person, don't know them or their reputation‌.but really want the house. Solution: 1. Firstly, if you go forward, you will be signing a Customer Service Agreement. NEVER sign a Buyer Representation Agreement in this situation; Never! Why? Imagine a court room where you're being accused of something. Your lawyer speaks on your behalf and knows all your information of the situation because you have disclosed this to them. When the lawyer is done speaking on your behalf they walk to the other side of the room speak for the person accusing you using the information you've told them to try and convict you. Not exactly right is it? This brings me to my next point 2. Say absolutely nothing to the Seller’s Agent or any other Agent at the open house. You can ask questions about the property but never reveal your motivation for moving or any financial details. Major Point- As mentioned earlier, the Sellers Representative is bound by law to present all relevant information to their client, the Seller, given from any source. If you tell them your budget is $300,000 and the subject house is going for $289,000 you can guarantee they will push you on price simply because at some point the Sellers are counting on the Buyer thinking, we can afford it, what's the big deal. Your information you gave the Sellers Agent in passing will be used against you, guaranteed. Do not compromise your negotiating position. 3. If you feel pressured or not confident that an agent is looking out for your interests, stop and step back from the situation. 4. Last huge point- Remember the point about the Sellers Representative by law having to tell vital information to their client about potential Buyers? Is someone who is bound by law to represent their client with competence, loyalty and obedience the person that you want writing up a contract for you to

sign? Are they going write the document in your favor with your interests or in favor or their client, the one they owe loyalty too?

Situation #2: A Home Buyer is looking at a newly constructed home with a New Home Representative but also wants to look at re-sale homes with another Realtor. How do you proceed? Solution: This situation can arrive when a Buyer feels that they should be represented by someone who specifically sells new homes. This feeling can arrive from a comfortable meeting with the Representative or from a fondness of the construction quality a builder uses. Follow this guideline for a New Homes Agent vs. Re-sale Agent situation: 1. Sit down with the Builders New Home Representative outside of the model open house time to get better feeling of the agent. Remember- The representative works for the Builder and the Builder is their Client...not you! You’re in the same situation from problem #1 but for some reason New Home Agents have a way of wooing people to use them and not re-sale agents. So remember, no Buyer Representation Agreements signed by Buyers when dealing with a Builders Agent. 2. For your re-sale Home Agent- if you find a home that you want to offer at, and is not your Buyer Agents listing, feel free to sign the Buyer Representation Agreement, if you’re comfortable. But, in the “Geographic Location” on the Buyer Representation contract insert the address for the potential purchase. This means that if you buy that home with the Re-sale Agent representing you for the length of time the buyer contract is, plus the holdover period, then that Realtor is entitled to be paid for their work. If the Realtor just inserted a city or county into the Geographic location then the agent will be compensated for any property that a Buyer purchases if the home is in the subject area. This includes New Homes! 3. Make your wants and desires kindergarten clear. Kindergarten clear is exactly like it sounds; no room for interpretation. How do you do this? On clause 11 of a Buyer Representation Agreement there is a spot for schedules. You, or your lawyer, can write up a document to be signed by all parties that clearly states what you're trying to say. If no commission is paid to a Realtor if the Buyers purchase a newly constructed home then say it. If the Re-sale Buyer Agent won't sign and agree to it, then talk to someone else. Don't be pushed around by an Agent saying these are "standard forms". Every situation is different and there is no such thing as standard forms; they're all a different set of instructions in the eyes of the court. B.R.A schedules are an under used as part of these agreements. 4. It is still a good idea to have a Representative of your own for buying a newly constructed home. A very high percentage of homes are sold through Real Estate Brokerages and builders know this. Most builders offer out commissions to Real Estate Agents involved with new home sales. As a Buyer, you can still ask questions to your own agent and remember as a client of a Brokerage you can expect certain duties and if you feel that they're not met you have legal recourse.

Situation #3- A Buyer calls a Sellers Agent to view a condo. The Agent sets up the appointment and see’s that there are three more condos available in the complex. The Sellers Agent asks if the Buyer would like to see all the condos available? This is a simple question asked to a Buyer that is usually a no-brainer. Of course they want to see the other properties available. But, if the Buyers have viewed the original condo they called about and are not interested in pursuing that unit, how should they proceed if they want to purchase one of the other units available in the same complex the agent showed them? What should the buyer do? Try these steps: 1. The Realtor demonstrated competence as a professional right from the start in offering to show you all the available properties- not just their listing. If you get a feeling of professionalism and respect than perhaps you would feel comfortable using them to represent you in the transaction. 2. Having just met the person, if you would like to pursue another unit quickly, a customer service agreement may be a better choice for you until a stronger real estate relationship can be formed. That way if things don't meet your expectations then it is easy to part ways. Or start back in chapter 2 and get a referral to another agent. 3. If you sign a Buyer Representation Agreement with this Professional you can still use the address of the property as specific geographic location for this document. In our opinion this is the best option for legal recourse and it is our opinion that most agents are reputable professionals who can protect your interests.

Situation #4- A Buyer views and offers to purchase a private sale but the offer is not accepted by the Sellers. A week later that same Buyer meets a Realtor they wish to work with. However , the home they still really want is the private sale the lost out on. How does a Buyer go forward with viewing MLS properties but still maintain the right to purchase the private sale if the opportunity comes up and not be liable for commission or obligation to their new Buyers Agent?

Here's what could happen: 1. If you have signed a B.R.A then that agent is entitled to receive a commission under clause #2 , of the B.R.A. In the commission section, you will see there is two options for commission payable to a the Buyer’s Agent in a B.R.A: 1. A percentage of the sale price payable to the Buyer’s Agent from the Buyer or 2. A blank line where a specific number like $7000 can be inserted. The commission can be stated also as "the commission indicated in the MLS listing agreement." Each MLS agreement must have a commission that is paid out to a buyer’s agent from the Sellers. Major Point- If a specific amount of commission is inserted in the commission clause there cannot be a percentage used for commission as well and vice versa.

2. A schedule can be inserted, as per section 11 of the B.R.A that states: "It is acknowledged and understood that if Joe and Jenny Buyer of 123 Main St. enter into an agreement to purchase with Gary and Mary Seller of 123 Anysteet than there is no commission payable to ABC Brokerage INC. Easy, simple and Kindergarten clear. If the real estate agent does not like it, move on. 3. Your Realtor could go to the Private Sellers and ask if they could facilitate the sale and the sellers would then pay a commission to the agent directly for this service. This method is becoming more popular as Sellers chose to look after their interests but are happy to pay a reduced commission for Agents to bring their Buyers to the home. The Buyer should have the protection a Buyer’s Representation Agreement in this situation so that their interests are protected.

There are many more unique situations that can arise in the course of Real Estate. You will be using a lawyer to close the transaction so don’t be afraid to ask questions to them if you feel there is a situation you uncomfortable with.

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Chapter 6- The Offer to Purchase The Offer to Purchase Real Estate and The Documents That Will Follow the Offer This is the document that receives the most attention. Although, as you can see, the other previous documents are equally important to the transaction, the Confirmation of Co-operation and the Offer to Purchase are the documents that introduce a buyer and seller to each other. These documents are going to be vehicle that drives Buyers and Sellers to agree or not to agree.

Easy question- What is an Offer to Purchase? The close to correct answer- How much money is going to be exchanged for a property, when is it going to happen and what conditions are there that need to be met before a Buyer takes possession. Close. THE BEST ANSWER- An offer to purchase is a list of instructions to the Lawyers in the transaction that are signed and agreed to by a buyer and Seller. In almost all Canadian Real Estate transactions Lawyers complete the deal. All the funds for the purchase are transferred through them. All the work to see if how much money is owing on the property or any liens against the property show up in a title search done by the Buyers Lawyer. Your offer to purchase instructs the lawyers what to do.

The Document The agreement to purchases is forever changing as the law evolves in just about every area of law. Every year there are small changes to the wording and even entire clauses inserted because of changes to the law. The small print is protection for the buyers and sellers in the transaction. The interpretation of these clauses should be addressed to your legal counsel. However, your Realtor should have an understanding of the document and consult when necessary for interpretation. If a Realtor is asking someone to sign a document they must the Realtor must know what they're asking you to sign. Here is a overview of some of the points of the agreement of purchase and sale that a Realtor should guide you on.

*Remember: Any part of an offer can be changed by simply crossing out wording or numbers and inserting the new information with a pen. The document does not need to be re-typed every time to reflect changes. Here is an example of a price counter offer. The parties would then initial by the hand written changes near where the change was made. For example: Parts of the Ontario version of an agreement of purchase and sale is provided for guidance.

Buyer, Seller, Property Information At the beginning of the document it is clear to state who is involved. A buyer or seller can be an individual, an entity, a business, an estate, Corporation or just about anyone who can write or receive a cheque. If there are individuals involved it is wise to use their full names. Using your full name is to help fight against identity theft. The property has a location address and a legal address. The location is where the mail goes. The legal description is the key to your Lawyer finding out information about the title and if it can be cleared in time for closing. A high percentage of property titles can be cleared and everything owing will be paid off before the agreement. A small number of properties have money owing in excess of the purchase price to complete the transition. At that point the buyer can walk away, wait for the title to be cleared or assume the money owing.

Purchase Price and Deposit The amount that someone is going to pay for the property is the next section. If the offer price is agreed to by everyone than the purchase price is not changed. However, if someone chooses to change the purchase price for the property than it can be done by simply crossing out the price and inserting with a pen the new price offered. Some offers can look unreadable by the end of negotiations with all the changes to the price. A simple clarity copy of the accepted offer can and should be attached with the original and sent to both parties’ lawyers at that point. Remember, if the instruction sheet is unreadable how is anyone going to follow the instructions correctly?

The deposit is a monetary offering, given by the Buyers, that is given to the Sellers Representative to be placed in the listing brokerages trust account. This tells everyone involved, here is small amount of money today we will be back in on the closing date to give you the rest. A deposit is a statement that says, if I the Buyer fail to close this transaction you can keep my deposit. If a Buyer is lucky, that's all that will happen to them for not closing a transaction. In certain parts of Canada it is common to ask anywhere from a $10000-$50000 deposit on residential real estate. For commercial property deposits can be much higher. But, in smaller rural areas deposits of $1000 can be common. Also, you will notice that the deposit can be given when the offer is accepted or with the offer. If the deposit is entered with the offer the monies must go directly into the Seller’s trust account within 5 days. If your offer does not come together you may have to wait to get your deposit back. On the other hand, it shows a strong sense of seriousness to the Sellers if you produce an offer to buy their home and a cheque for $40000 at the same time. Go by your comfort level of giving up money that you may not get back for 5-15 days and tell your Agent how you would like to deal with the deposit for an offer. If the agreement to purchase does not come together because a Buyers condition (financing, home inspection) of the offer is not satisfied to the Buyers liking, then the deposit is returned in full to the Buyer without deduction. If the transaction does not come together because the Buyer fails to meet the obligations in the transaction then they could lose the deposit and possibly be liable for the commission to their Buyers agent. Information on terms and conditions in an offer to purchase will be later in this chapter.

Irrevocability This is a clever way to say a Buyer or Seller has until a certain time to accept the offer. And, once accepted, cannot be revoked or changed without mutual agreement. This section also states who made the offer to whom. The Buyer makes an initial offer but maybe the Sellers made a counter offer. You would see “Buyer” entered into the first spot and further crossed out and Seller would be inserted in this situation. This process could go on for many changes….

Here is a common process for offering at property to explain Irrevocability 1. Buyer offers to purchase a property and says you have until 9:00 p.m. tonight to accept the terms and conditions of this offer. This is irrevocable by the Buyer or one could say that the offer is the Buyers offer “on the table” to the Seller. 2. Seller says- I do not accept the offer as it is now. I will change the price and the Buyer now has until 9:00 p.m. to accept the Seller’s counter-offer. The offer is now irrevocable by the Seller and is the Seller’s offer back to the Buyer. 3. The Buyer accepts the changes and signs the acceptance on the offer. 4. At this point, if there are any conditions in the offer that have time limits attached, the conditional time period starts at the moment of acceptance to of the offer. Sometimes the irrevocability time is used as a pressure tactic. Imagine an offer that comes in and the offer has a 10 minute deadline to accept it. This is common practice for multiple offer situations or for a Buyer not wanting another Buyer to enter the negotiations before their offer has been dealt with in full. Other times the irrevocability deadline can be extended with the stroke of a pen to the next day for someone to decide what to do with an offer. The three options a Seller or Buyer has when faced with an Irrevocable deadline in Real Estate are: - Accept the offer - Counter the offer - Do nothing and let the deadline pass creating a null and void contract

Completion Date This is the date on which the ownership + money will change hands and the new Buyers will own the property. It also states the property will be vacant unless otherwise mentioned in the offer.

Notices There are many other documents that can accompany offers before and after the offer to purchase is complete. Some of these documents include counter offers, waivers, amendments, mutual releases ,disclosures, surveys and other property information. There is a spot for two fax numbers to be inserted for receiving documents for the Buyers and Sellers. Generally, the fax number for the Buyers will be that of the Buyer Representatives Brokerage and the Sellers notice will be their Representatives Brokerage. It is very interesting that there is a bold section that states in a situation where multiple representations occurs the Agents brokerage cannot be the contact for notices.

Chattels Included , Fixtures Excluded and Rental Items A chattel of the agreement is an item that is included in the purchase price but not fixed to the property. Appliances, mirrors, rugs, blinds, window coverings are some basic chattels of residential properties but in reality anything can be asked for. A list of chattels can be a few items to an unlimited number of items. Imagine a Buyer from overseas coming in and saying I want the house, your furniture and your car! It can be done if the seller accepts the list and the final price.

If you know that you will be offering at the property it is a good idea during your inspection or at a showing to write down the chattels model, serial numbers and a brief description of the items. When 'Stove" is placed in the chattels it simply means any stove. As the buyer, you’re interested in receiving the stove you viewed with the property. This theory applies to any chattel that has a model and serial numbers to it.

A seller may a want to remove an item from a home that is special to them. Sometimes a chandelier can be something they want to take with them. There is a spot that a Seller can include this chandelier as an item not included with the purchase price and the Buyer can agree to this or not. A good selling

practice is to put in the listing comments all fixtures that are not included in the sale. There are different types of rental agreements that a property could have. As a Buyer, what is important is that the rental agreement can be assumed or can be bought out. A few examples of rental items on a property are water heaters, water softeners, furnaces, air conditioners and satellites. There are new types of rentals popping up for solar panels and wind turbines. These two rentals must be explained in full and the rental agreement should be reviewed by a Lawyer. This is because some rental contracts are with the individual and not the property. Therefore, if you’re buying a property and thinking that you will be receiving income from the solar panel this could be false and could change the motivation to purchase a property. Also, if a contract for a solar panel is with a Seller they will want access to the property for any repairs. As a Buyer you may not be interested in this type of access.

Common Expenses, Parking and Lockers for a Condo Common expenses are more commonly referred to as the condo fee. Every month a condo owner pays a fee that will be given to the management of the condo corporation. This corporation is in charge of the management of the complex and also the reserve fund. A portion of this monthly money is used for any major repairs to the units and is placed in the reserve fund. The other portion of the monthly fee covers items specified by the condo corporation like: Landscaping, water, pools and clubhouses, exercise rooms, snow removal, hydro, gas, management and other items. Every condo arrangement is different and may include all or none of the items listed. As well, the monthly fee can range greatly based the different items included; the more services included, the higher the fee.


Different types of condos have different types of parking and locker arrangements. A townhouse style condo may have no lockers available and the parking spot is assigned right in front. On the other hand, a high rise condo could have locker for storage and no parking space or a parking space that has been purchased or assigned to someone else. In major centers a parking spot can be very expensive. It is not uncommon to see a parking spot sold for $40,000 to $60,000 or more. So, it is vital that the parking information be correct if there is a parking spot in the agreement.

The Terms and Conditions of an Offer

Terms of an offer= An agreed to stipulation that the Buyers and Sellers agree upon. When a term is agreed to it must happen or the contract is not fulfilled and could be null if either party chooses it to be. Example of a term: The buyer agrees to pay the balance of the purchase price, subject to adjustments, by bank draft or certified cheque, to the seller on completion of the transaction. i.e. Buyer will pay for the home on closing. This is the term at the top of almost every schedule A in all offers. A condition of the offer- A condition is a statement that favors either the Buyer or Seller. It has a timeline attached to it and a statement that reads if the condition is not fulfilled than the deposit is returned in full and the basically the offer is null and void. Example of a condition- This offer is conditional for 7 days, from acceptance of this offer, for the Buyer to satisfy themselves at their expense of: The Buyers obtaining financing for the purchase. This is an example of a Buyers condition to secure there financing for the purchase. Usually, the financing process has already been started before the offer is submitted and can be firmed up before the seven day conditions.

Terms A term is a statement for both parties to agree or not agree that something that will or will not happen. It is a statement that can be specific to one thing or many things. For example, if you purchase a home with an in ground pool in December it is impossible in Canada to see if that pool is working correctly. The Buyer may want a warranty that the pool is working. At that point perhaps a term that states the sellers will have the pool professionally opened and inspected and $3000 will be held back until this happens would be fair for everyone involved. A general clause might speak to the appliances will be working on closing. The term would read that the seller agrees that the appliances included in this transaction will be in working order and free from all liens and encumbrances.

Conditions of an Offer An offer can be conditional upon anything as long as it is agreed to by both parties. Here is a list of some of the conditions that can appear in residential offers: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Obtaining financing for the property The results of an inspection from an Inspector of the Buyers choice The quantity and quality of water Information provided in a condo status certificate Obtaining satisfactory Insurance. Sale of the Buyers property Obtaining a survey suitable to the Buyers Laywer Lawyers approval from the Buyer’s or Seller’s Solicitor The septic being legal, installed with permits, operational and adequate to their needs 10. Permitted uses under existing zoning 11. The Seller finding suitable accommodations before within a certain time period They’re many more conditions that could be used. As long as the Buyer and Seller both think that the condition is reasonable the condition can be inserted. Let's look at the first four conditions on this list a little closer.

Obtaining Financing for the Purchase As mentioned in from the beginning is of the highest importance that you know you financials before entering into the world of house purchasing. A Seller is looking for as few conditions as possible on an offer. If you were ever in a position of multiple offers and your offer was identical in price to another offer, the one with the least amount of conditions could be the difference. If you have a letter of commitment from a Lender or you know that the money is ready in the bank than your offer can be stronger. But, either way, you need to have your financing secured. The “old way” of wording a financing clause would be to talk about the length of the mortgage term and the interest rate that it must be lower than along with the types of payments. It would read like this: "This offer is conditional upon the Buyer arranging a first charge mortgage, at an interest rate no higher than 5%, repaid in blended monthly payments of no more than $800.00 per month, amortized over 25 years with a term of 5 years. Unless the Buyer waives this condition on or before January 1st, 20xx this offer shall be null and void and the buyers deposit will be returned in full without deduction. "

Question: If you’re selling your home, do you really care about the Buyers mortgage terms, payments and interest rate? Or, do you just care that the Buyers are going to show up on closing with your money? This long and unnecessary clause could be replaced with something like: "This offer is conditional until January 1st, 20xx for the buyers at their own expense to: 1. Obtain suitable financing for the purchase" Which clause is clearer to you? The Sellers might feel the same way…

Inspection Clauses The popularity of real estate television shows has enlightened people to a new (mis)perceptions of inspections. A consumer views television inspectors ripping houses apart, and sometimes rightly so, giving a dramatic edge to the inspection of a property. While this may seem realistic to someone, inspections can be very different than T.V. would have you believe. It is very common for people to bring in experts to give opinions on their home purchase. The part of an inspection that is coming into question is the "expert" part of it. From around the turn of the millennium until today we have been riding an incredible real estate high in Canada. The number of Realtors has climbed to new highs and with that high many new Home Inspectors have entered the inspection business. Some inspectors have construction or trades background; others have taken home inspection courses and have very little hands on experience with home components. What is hard to find in a Home Inspector is the proper delivery of information to Buyers combined with a solid background in the home components they're evaluating.

From the dilemma of finding a home inspector that is a good communicator and an expert in their field has created a need for a new inspection clause. When one takes into account these three points you will see how a more suitable clause was needed: 1.

First Time Buyers may need to have a calm, qualified Inspector as a learning experience to care for their new home


Some Buyers may be looking to do improvements to a property well beyond the scope of a Home Inspector


A Buyer may have a higher level of trust from a family member or friend to do their inspection.

A Buyer may only be interested in one component of the house to be inspected. It is the Buyers responsibility to find “patent defects” within the home. It is the sellers responsibility to disclose all

“latent defects” in the home. This is the root of many court cases over the years. I will explain patent, latent and physiological defects in a home later in this manual Current home inspection clauses being used are "standard inspection clauses" could read something like this: This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer's own expense and the obtaining of a report satisfactory to the Buyer and, if not satisfactory to the Buyer, a report revealing deficiencies in the property which the Seller is willing and able to remedy. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 7 days from acceptance of this offer that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller as aforesaid within the time period stated herein. If your Realtor inserts a clause like this in the agreement, you may want to suggest using a more Buyer friendly clause like: This offer is conditional until January 1st, 20xx for the buyers, at the buyers expense of: 2. Results of an inspection from an inspector of the Buyers choice This clause gives the Buyer flexibility to bring in a home inspector, contractor or whomever the Buyer feels will best answer the questions they have about their purchase. If a Buyer wants to knock down walls and change the support system of a building a Home Inspector is not the one to answer engineering questions; bring in an Engineer as your Inspector. The same can be said about renovations like a bathroom. A contractor may be the best choice for this inspection In the long worded inspection clause there was wording that spoke to deficiencies uncovered by a Buyers unsatisfactory inspection and referred to them as “deficiencies which the Seller is willing and able to remedy”. If this clause were inserted into an agreement it would mean that if the Buyer found a problem during the inspection the Seller would have the right to correct the problem. Stop!

Huge Mistake- NEVER let a Seller complete work on a property that your inspection uncovered. The Sellers are leaving the property and You will be taking ownership of the property. While some Sellers have the integrity to complete a job correctly other Sellers will complete the work at the lowest quality needed to say the work was completed according to the contract. If the problem uncovered by the inspection was a short life left on the current shingles and you gave the Seller a chance to remedy the issue, the Sellers could place new, cheap, short life shingles done by a family member on as a "remedy" to the problem. And, they could get away with it unless it was specified how or who did the new shingles.

If the inspection uncovers a problem that needs to be addressed here are your options: 1.

Walk away from the transaction. If a problem is too great for your comfort level then you have discovered the reason for the inspection clause to be in agreement. Ask for a credit on closing for repairs to the property. Adjust the purchase price to account for the problem.

2. 3.

Condo Certificate Condition In a purchase of a condominium there is always a status certificate that accompanies a condominium. The Buyer’s lawyer will request this certificate to review the information contained in it. The information that can be found in the document is:

1. 2. 3. 4. 5. 6. 7. 8.

The amount in the condo corporations reserve fund The verification of the amount paid each month as a condo fee A schedule for upcoming maintenance for the condo complex All work that has been completed to the subject unit Any special assessments that have been issued to cover costs of a repair the Any lawsuits against the condo corporation If there has been a reserve fund study completed Rules about decorating the unit or restrictions on pets

Any other information that affects the status of the unit, parking arrangements or you enjoyment of the unit will be in this document. Always have your lawyer review this document before removing the condition.

Reviewing the Condominiums Reserve Fund This fund is the money that will be used to make renovations and improvements to the complex. The schedule of improvements within the certificate correlates with the amount in the reserve fund. If the Buyers Lawyer's opinion is that the amount in the reserve combined with the renovations upcoming may cause an increase in the condo fee then this could cause the buyers to opt out of the agreement. This opinion should always be given from your Lawyer and not a person who is unfamiliar with reviewing these documents.

Special Assessments A special assessment is an increase in a condo fee for a specific period of time or a one-time charge to deal with an issue that is not anticipated by the condo corporation. Unfortunately, there are times when a small levy must be assessed to cover a cost that nobody can predict. Harsh weather, rising water tables, latent defects on a property are just some of the issues that could cause this need for more funds. When your Lawyer reviews the condo certificate they can see if any special assessment have been issued in the past. If there is a trend of continued special assessments than maybe the management of the condo needs to be looked at as a reason for shortfalls in money. Within the legal community if certain complexes have a reputation for questionable management of the owner’s money that news will travel fast.

So, when dealing with a status certificate the proper wording would be closer to this: This offer is conditional until January 1st, 20xx for the buyers, at the buyers expense of: Information provided in the Condo Status certificate As you can see this is an important document for purchasing a condominium. And, once again the clause to use is a short statement that is in favor of the buyer.

Water Well and Septic Conditions In Rural Canada many Canadians are hooked up to a septic tank instead of sewers and a water well is used instead of city water or a pipeline. With each property having its own water source and waste disposal system it is important to make sure a Buyer understands these vital systems and gain as much information prior to closing.

Dealing with Water Wells Everyone in Canada who owns property with a well as the water source will expect that the water will be clean and plentiful. It is a fact of life in rural Canada that the owners of a water well must take measures to insure their water safety. A Buyer buying a property with a water well needs to understand that it is important to verify that: 1. 2. 3.

There is a large quantity of water in the well The well cap and water well equipment are in good shape If available, a water well record can be obtained showing the original date it was

driller or dug and the depth of the well. These cannot always be found.

If there is "quantity" of water in a well then it is not difficult to achieve quality. The basic starting information that tells the quality of the water is the levels of E coli and Coli forms which are by definition: E coli- E. coli are bacteria that are commonly found in the intestines of humans and animals. There are different types of E. coli; some not harmful to people and some which cause serious illness Coli forms- Coli forms are bacteria common in the environment and come from human and animal waste. Although most are harmless, their presence may indicate that there are other harmful bacteria in the water.

If you are buying a property in Rural Canada it is a strong possibility that you will encounter these types of bacteria in your drinking water. So how do you manage your water quality? Simply do a Google search and you will come up with the process to maintain a well in your area. Do not be shocked when the guide refers to “cleansing” or “bleaching” your lines. It almost seems cliché or poor practice of the past with someone telling the Sellers to pour bleach down the well to insure safe water quality reports. But, in fact, most guidelines for sanitizing a well in most jurisdictions and creating a safe water source refer to this practice. Remember too, you're not only sanitizing the well water you drink but also the pipes in the home and outbuildings that may never have been cleaned before.

A scenario for clarity: You are walking down a sidewalk in any city in the world and noticed your shoe is un-tied. You stop, kneel down and tie your lace up. To your dismay, you realize you have kneeled into a pile of dog droppings. You are instantly annoyed at the situation. But, everything is o.k.! You remembered that you have three napkins in your pocket. You pull out your napkins and you wipe the "e coli" (that's what it is!) off your knee with the napkins really, really, really well. Later you return home. You change your clothes and when you take off the soiled pants you say to yourself, "I really really really scrubbed the dog crap off good with those napkins. I'll just hang them up and wear them again tomorrow". Would you ever, if you had a choice, wipe dog feces off your pants really, really, really well and then call the pants clean? Or, would You would take them off, place them in your washing machine with soap to make sure the droppings were removed and the pants were once again fully sanitized. Your pants are no different than your water well and pipes; they need to be cleaned.

The Buyers Lawyer will want a clean report to close the transaction and if you're putting a mortgage on the property, the bank will defiantly want to insure that the home they're lending on will have safe drinking water. A bank only looks at an investment in a property as; would we be able to sell this

property for more than the money we are lending on it if the buyer was in default of their obligations to the mortgage. If the properties water source is sour than the bank will not touch it.

Other Quick Well Issues: * A water sample could be spoiled if the source tap of the sample has a filter or removable cap. Bacteria can hide in these types of taps (usually in the kitchen). Some people remove the attachments and burn around the tap to sterilize the tap. As a Buyer, you should not taking a match to anything in the house and you could damage the tap in the process. Ask for filters to be removed prior to the water sample being taken. * Give yourself at least 2-4 days for the water report to come back from the local authority. If the first sample comes back positive for bacteria than there needs to be time to do more testing. * Do more than one sample. Run the water for 3-5 minutes and take a sample. Keep the water running for 10-15 minutes and take another sample. * As a Buyer you will be taking the samples and nobody else. Why? The Sellers want your money and will gladly give you a "clean" sample. Realtors are paid when property transaction closes. If a Realtor really wants a transaction to close and has poor ethics, one drop of bleach in a sample will guarantee a clean sample. If the water test is the only condition remaining for a pay cheque, an agent COULD sabotage the process. This falls under the same theory as deficiencies in a home inspection that Seller could remedy; Never let someone else complete the work you want done. Do your own water tests by following the instructions on the sample bottle or Google the process. Therefore, the water well condition that could be more useful to a buyer would be: This offer is conditional until January 1st, 20xx for the buyers, at the buyers expense of: The quantity and quality of water.

Final Word On Conditions When a Seller receives an offer that is filled with obnoxious conditions it takes a simple process and makes it look convoluted. From the Seller’s perspective a condition is an escape from a transaction. For everyone’s sake the process should be as simple as possible; how much money is being exchanged and when. For the common Seller to receive an offer that has three extra pages of pompous schedules is rarely necessary when all the buyer is trying to say is; here's how much I'll give you, here is when you can have it, let me take the paperwork to the bank to firm up the funds, let me have an inspection with an inspector and let me keep your fridge. If your Representative tells you that the condition clauses used in the offer are "standard clauses�, ask them if they think you deserve standard?

When The Buyers Are Happy We have now come to the point when all the conditions have been dealt with. The money is on the way for the purchase, the inspection turned up no problems and the agreement is going smooth. How does a Buyer "firm up the deal" and say “I’ll take it”? This can be achieved in different ways: 1.

A document called a Waiver


The Notice of Fulfillment document


A condition that is phrased in what is called, condition subsequent


An Amendment document

Most conditions, but not always, are Buyer favored. This means that nobody can force the Buyer to waive their conditions. Only in their sole discretion can they tell everyone involved that they will go through with the purchase. Simply, the Buyers decide if the house will be sold or re-introduced to the market; not the Sellers, Brokerages or the Agents involved. Big Point- If you’re a Buyer always make an attempt to complete your conditions. If you have an inspection condition in the offer and you do not do an inspection than how can you back out of an agreement that is subject to an inspection? This is a potential legal mess.

The Waiver A waiver is the Buyers way of saying to the Sellers, I've checked to make sure my money is good, I inspected the home and I will sign this waiver saying that I am happy with my purchase. This type of paper trail is encouraged because it shows that the Buyers themselves completed their conditions within the stated time. After a waiver has been received by the Seller’s Agent you have a firm and binding contract. After the condition deadline it would take a mutual release for a Buyer or Seller to be released from the agreement. Normally the inspection is the last condition to be waived as you would not want to pay an inspector if your bank will not finance the purchase.

Notice of Fulfillment This document is much along the same lines as a waiver. The document more clearly states that the Buyers had a condition, for example, financing for the purchase and that the financing has been approved at the Lender. The Notice of Fulfilled says the condition has been completed and the transaction will procded. The only situation were a notice of fulfillment is unclear is when a Buyer asks for a condition to be inserted in the offer to purchase and they choose not to complete the condition but still firm up the transaction.

Condition Subsequent We have gone through some of the conditions that could be in an offer. We have now introduced what to do when a Buyer is happy with their purchase and continues on the path to ownership. There is one other way that a Buyer can say their happy with the deal; say nothing. Condition Subsequent is defined as: A contractual condition that suspends the coming into effect of a contract unless or until a certain event takes place. In Real Estate, when an inspection (or any condition) condition is written into an offer to purchase with a subsequent nature it means that if the Buyer does an inspection on the property and they’re happy, then they will do nothing in writing. Remember, all conditions have a time limit. So, if the time limit comes and goes and the buyer does not produce a document stating they will not be completing the transaction then legally the offer to purchase is firmed up. Sound confusing? In our opinion, avoid these types of conditions. If your Realtor claims that it saves paperwork for you to sign you they could be hurting you and not even knowing it. If you recall, the definition of an offer to purchase was; An offer to purchase is an instruction sheet that all parties have signed and agreed to that is handed to theirs lawyers to complete a trade in real estate. The waivers or notices of fulfillment are part of the paper trial of instructions to your lawyer. If there is no document to say a Buyer was happy or unhappy with their conditions, how can that be defended if there was court action? One more document that clearly says a Buyer is happy or unhappy when it comes to buying a home is worth the effort. Imagine the nightmare when you're not happy with an inspection that you completed on your last conditional day but because your condition was due at 5:00 p.m. and your agent got stuck in traffic or ___________(insert an excuse why the document did not reach the other side) you now own the home that failed your inspection. If you had a waiver, you would have to put in writing that you're satisfied. In writing is always the best way to go in real estate. Good contracts make good friends.

Amendments Amendments are used when a party or both parties wish to make a change to the agreement to purchase. This change can be anything in the agreement as long as both parties agree. Generally, changes can be the closing date, a chattel to be included or the extension of a condition timeline if more time is needed. But, there is one thing to be aware of when using an amendment to delete/Insert something from an

agreement to purchase. Once an amendment is agreed to and something is deleted, legally it is the same as if the words were never in the document. The only reason for mentioning this is to be aware that the amendment document can also be used as a pressure tactic. Example- The Buyers completes a home inspection and found concerns with the home. The Seller’s motivation has not been revealed to the Buyers but they're in a rush to sell. The Buyers decide that they want an adjustment in the price to compensate for the issues revealed during the home inspection. But, because the changes the Buyer wants falls within their inspections conditional period they prepare an amendment. The Amendment states under the Delete Section: Removal of all conditions. Also in the delete section they remove the purchase price of $400,000. Further down the amendment document at the Insert Section it states: Insert Purchase price $390,000A $10,000 price adjustment. What has happened is this: The Buyers have removed their conditions and thus making the deal a firm and binding contract. But, they have changed the price by $10,000 to compensate for problems during the home inspection. If you’re the Seller, and in a rush to sell, you might feel backed into a corner to accept the amendment to move on; not a great feeling.

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Chapter 7- Buying A New Home While searching for your next home you may want to consider buying a new home. This is a great way to get exactly what you want with warranty on the work. Why doesn’t everyone buy new? Are there any disadvantages to buying a new home? Like all major purchases there are pro’s and con’s to the buying cycle. Let’s start by putting this out there; just because the home is going to be new in every way, it may not be perfect. It will be closer to perfect than most homes but the quality of workmanship is something that is always comes into question. If you are the type of buyer that gets out the magnified glass to search for problems, you will find something. If you’re calling the builder on a daily basis because specific tasks were supposed to be completed by a certain day and it’s now Friday but the works not done, you’re going to have a unrealistic expectations of your new home. First rule of building; keep breathing.

Finding the Right Builder How can you find the right builder for you? Too often, price dictates who you choose to build with. This doesn’t mean that the builder is inferior or your home will be built with any less care. Using any builder requires the same steps as finding a competent Realtor. Start by getting referrals from others who have built new. The only difference is this time you should be able to inspect the work of the builder. The builder should have no shortage of people who are willing to provide a written testimonial, video testimonial or an open door to show off the builders work. If the builder does not have these things, that might be your first clue to build elsewhere. If you’re working with a Realtor, they can also be a source of information about builders. Builders and Realtors have a love/hate relationship. When times are good and new homes are moving fast, real estate commissions generally go down. If times are slower for building, every builder is offering bonuses and higher commissions for Realtors. Realtors have memories like elephants when it comes to builders that have not performed well for clients or tried to escape commissions owing to them. The most reputable builders won’t participate in this commission yo-yo game. How does this affect a buyer? Let’s not forget the buyer representation agreement you might have signed. New builders generally offer a commission slightly less than the market average. Perhaps because they believe there is not much work in selling a brand new product. But, check your B.R.A. and make sure there is not a % or a specific amount in the commission section or you could owe your Realtor some money on closing. Protect yourselves all the time. Review notes on the B.R.A

What is Important in Buying New Home? Just like your re-sale home you will have a list of important non-negotiable items. This list is still relevant. Now, instead of looking for a home that meets your needs, you will be looking for floor plans that translate into those same needs. Every builder should have a list of designs in their portfolio that comes close to most people’s needs. However, it has become somewhat trendy lately for builders to call themselves “custom builders”. This means that if you see a plan online or from another source they can take that plan and give you a construction cost. The term “custom builder” is deceiving because a true custom builder will meet with you and design your home from the ground up.

Be Careful- When you see a plan somewhere, that plan is owned by someone else. There could be a fee that is passed to you to purchase the rights to this design. Now that you have compared your needs to the floor plans available you can start to decide where you want to put your money in the home. Here is a quick guide.  Update as much as possible your kitchen and bathrooms. Especially the master bedroom bathroom. These two items traditionally have the highest re-sale return on investment.  If affordable, pick a lot that is desirable. This might include a lot premium. But, if it looks like a prime spot today, it will most likely be a prime spot in 10 years when you go to re-sell.  When designing the home, always keep in mind that one day you will selling this home. Will someone else want to buy this home?  Technology changes. Choose to install the most up to date safety systems, audio options, video options, ventilation systems, home office, computer networking solutions, wireless internet and any other relevant technology to a home. For example, a recent trend was to install networking cabling for your computers. Shortly after, the trend of wireless modems made this cabling option irrelevant for most home owners.  Take your lighting allowances and add 50% to the total. If you have a $1500 allowance included in the price ad $750 to the price to make sure your lighting is higher end. Re-sale, re-sale, resale value.  Storage. North Americans are obsessed with “stuff”. Do you have somewhere to put this stuff?  Forward thinking from the builder. The best example of this is a gas hook-up for a BBQ or a special holiday light switch so you don’t have leave the house to un-plug your lights.  Insulation in the attic. Update it now because the recommendation for insulation seems to being going up all the time.  Focus on the rooms you will be spending most of your time living. Create a functional space.  Ask questions about unfinished areas. If a finished rec room is something that you will be finishing eventually, make sure the furnace, electrical panel, hot water heater and other systems are not sprawled out in the basement. Ask if they can be located in a more strategic way that makes good use of the open space. This is merely a guideline. Ask good questions that are important to you. Chances are the builder will have been asked similar questions and have the answers.

Some Other Building Tips 1. Be careful about building contracts that can fluctuate with the costs of building. Your building price should be the same price quoted in the beginning and not adjusted. 2. Be aware of designer’s ideas for the home. These people are great resources that are working with your pocket book. Make sure you know what you can afford to avoid disappointment. 3. Inspect the build often; but don’t inspect the build too often. Be reasonable with your inspections. Let the builder do their work and have a mutual respect for each other’s time. You could be asked to leave the site if you’re a hindrance to the process. And yes, the builder or the Forman will ask you to leave if your being a pest. 4. Make sure all your allowances make sense. Compare the cost of lighting fixtures and realize what the builders allowances can buy you. The cost of the home may seem too good to be true and the unrealistic allowances could be causing this. 5. Every builder’s contract is different and written by their Lawyers. Have your Lawyer read over the contract to protect your best interests. 6. Be careful of speculation. In major centers, you can buy a property today and not take occupancy for years. Some projects will sell a certain % of units before building. This can be a lucrative opportunity but make sure you understand the occupancy and assignment rules. It’s a good idea to view the builders previous projects as well. 7. Read current magazines for ideas. Just be realistic with what is being shown and the cost involved. 8. Understand your new home warranty. The warranty will help you correct problems once you move in. Also, this warranty can be an excuse leaned on by the builder to complete some items not completed in time (ie. If we don’t get it done, we can fix it in the warranty period). This is normal, but after a certain length of time you can file a complaint if there is outstanding work to be completed. The builder does not want their reputation hurt by complaints. 9. Understand that certain house features can’t be undone once they’re built. Plan the house in advance, inspect and be realistic. 10. Put everything in writing. The age of email has made misunderstandings less likely if utilized correctly. If you meet the builder and something is discussed, email the builder after to thank them and clarify the points that were discussed. 11. Remember that the builder can legally delay the closing. These delays will be explained at the beginning of the transaction. Too often it is explained as a situation that rarely happens. But, it is a reality and can happen to you.

12. Remember that you are moving into an immature area. This means trees are just being planted, sod may not be laid and you could be living in a dirty construction area for a while. 13. Builders are humans. This means that they love to hear praise. Tell them how much you like their work so far. This will go far to keeping the relationship in good terms. 14. The house will not come with curtains, blinds or shutters. Budget accordingly. 15. Be careful in your final walk through. Just before taking possession, you will walk through the home to inspect the work. Now is the time to point out problems you see that you would like fixed.

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HouseMasters Buyer Blueprint for Success  
HouseMasters Buyer Blueprint for Success  

A practical guide on how to buy real estate in Canada while protecting your legal interests