The process of buying property

I was prompted to write this because I have met several people who are unaware of the way buying property works in Canada. Even locals, perhaps first time buyers, have been unaware of some of this.

Ignorance of the process can be costly. If you know how it works then you can get a better deal and make the whole process less stressful.

First of all, I want to introduce the cast of characters.

The players

• The buyer (you).
  You are probably excited about finding a lovely new home.
• Seller
  You will not usually meet the seller since houses are typically shown empty.
• Listing Agent
  This is the seller’s representative. They are duty bound to represent the seller’s best interests.
• Buying Agent
  This is your representative. Similarly they are duty bound to represent your best interests. This means that they have to disclose any information they know about the property to you and not to let the listing agent know your position.

Finding a property

As the buyer you are interested in finding the right property. In Canada we have the Multiple Listings Service (MLS). This online database holds details of almost all property for sale throughout Canada. All realtors have access to the MLS.

My web site has a property search facility which lets you search the MLS. Sign up for this and you can make up your own searches.

Using these searches is a great way to start the process of finding a property. But eventually you will need to get a REALTOR® to act as your buying agent.

The first good reason to get a REALTOR® at this point is that they have access to more information within the MLS. The public only has access to basic MLS information, but realtors, like me, see more details and can do more detailed research on a property. If I am acting as your agent then I have a duty to disclose all relevant information to you. So if I have been told, for example, that a property has problems with the roof, I will tell you that and anything else I have found out.

Going to Open Houses

One thing that many people do is visit Open Houses. There are certain days of the week in each area when Open Houses are commonly held. So you can simply drive around an area and follow the Open House signs. Or you can check the local papers for listings of Open Houses.

When you see an Open House there will be a REALTOR® in the house. They are the listing agent or their representative. If you like the property and are considering buying it, you are strongly advised to find another REALTOR® to represent you.

This is because the REALTOR® in the Open House would have divided loyalties. As they already represent the seller, you cannot rely on them representing you. Suppose they knew there were problems with the roof. Would they tell you? Or would their loyalty be to the seller?

Similarly it is wise not to say too much to the listing agent at this point. Anything you say, even that you are new to the area, may be of advantage to the seller in the negotiation.

Viewing properties

When you have a REALTOR®, like me, representing you, they will use the MLS and their local knowledge to give you listings of properties that might suit you. I keep up with all the property in my area.

When you find a property that is of interest, as your REALTOR® I will arrange for you to see it. This viewing appointment is made with the listing agent, who is usually present at the time. The seller is very rarely present.

When you are viewing the property remember that anything you say to or in the presence of the listing agent will be passed onto the seller. This could tip your hand in any negotiation that follows. If the seller knows you are anxious to buy because you love the house and have to get out of your rental property, then they may have the upper hand.

The offer

When you find a property that you want to buy, as your REALTOR® I will help you come up with a suitable offer. As your representative I will research the market and use any information I have to help you.

My MLS access gives me information on the history of the property and of course of similar properties and their asking and selling prices. I may also have been able to find out something from the listing agent that will help in the negotiation.

As your REALTOR® I will advise you, using all the information I have, on a suitable offer. The offer covers more than just the price. You will include the dates on which you want to complete and take possession.

Subject clauses

Commonly you will also have subject clauses. These are conditional clauses, such as the offer is subject to an acceptable building inspection and subject to financing. The offer specifies when these subjects are due to be removed. Typically this is a week to 10 days.

Note that the offer is written up as a formal and legal document, which you sign. I will then present the offer to the listing agent and the seller. This is often done in person.

The negotiation

When the offer is presented the seller is given a deadline by which they have to respond to the offer. Of course they may simply accept the offer.

Alternatively they may come back with a counter-offer. This too is a formal, written document. They might, for example, counter with a higher price, or different dates.

You can accept their counter-offer or make your own. This goes back and forth as many times as necessary. Each time you and the seller will need to initial any changes that are made to the offer. This ensures that there can be no dispute about the terms and conditions of the offer.

Sometimes the offer is not acceptable and the offer expires.

Offer acceptance

Assuming that your offer is accepted, you will now need to do whatever is necessary to remove the subjects. This is called “due diligence” and it is your responsibility to ensure you are happy with your new property.

For example you may need to arrange financing by seeing a mortgage broker or financial institution. Most likely you will need a building inspection. I will be able to give you a choice of building inspectors to use.

During this period you will need to satisfy yourself that you want to go ahead with the purchase as after subjects are removed the sale is binding.

Subject removal

When it is time for subjects to be removed, you have a choice. You can remove the subjects and go ahead with the purchase of the property as agreed in the offer. Alternatively you can leave the subjects standing and let the offer lapse.

If you decide to proceed, then you will formally remove the subjects, by signing another document. At this point the offer becomes binding on both parties. Neither you nor the seller can now back out.

At this point you will pay the deposit agreed in the offer. This is held in an interest bearing trust account for you. And you can be confident that the property will be yours on the agreed date.

Completion

You need to engage a lawyer or notary to draw up the final account and ensure that you receive legal title to the property.

On the possession date you will get the keys to your new property.

If you would like me to represent you when you are buying your next property, then call me 604.613.3442 or e-mail. I would be happy to help you find your next home or investment property.