First-time condominium home buyers need a reference sheet for the steps to home ownership. They want short and precise answers to questions, and these include: 1/ When is a deposit cheque cashed, and who holds the money? 2/ Who pays the Realtors, and what expense falls on the buyer? 3/ Under what circumstances can a buyer back out of a purchase, and is the deposit refunded? Here are the answers to these and further questions about buying your first home.
What can you afford? The first step is to consult a lender, starting with your bank, but likely also a mortgage broker. Home buyers need to know (preferably in writing) what their spending ceiling is, which is based on their income, available cash and/or RRSP savings, any cash gifts from relatives and debts already being carried. An on-line calculation is not adequate. You may choose to spend less than the lender qualifies you to spend.
New or resale? Some people must have a brand-new home, yet financial reality or more modest standards may see you shopping for a resale condo home. New is nice, but there is a cost premium, including the net GST. Consider your priorities and make this choice early.
Location, location, location. As the saying goes, this is usually the single most important factor in your real estate investment. We Realtors say that you can change the flooring of your chosen condo apartment home, and you can paint the walls, but you can’t move it and you can’t make it any bigger. Because central locations are more costly, you need to balance location against size, as your spending ceiling might buy you either a new one-bedroom suite or an older needs-work two-bedroom suite near downtown, or you could go to the suburbs for a new or near-new two-bedroom home.
Choose a Realtor. We’re talking about condo homes today, so make sure your Realtor is a Certified Condominium Specialist, knows the condo market and does a volume of work in this area. When I teach trainee Realtors I stress that there are three-fold more issues with condominium real estate than with house real estate. You’re buying a home, but also buying into a larger physical structure, into a political organization, and into a corporation with financial considerations. The best condo-specialist Realtor will have a comprehensive condo information web site and will assist with your understanding of the condominium documents when you buy.
If you’re shopping via the Multiple Listing Service (“MLS”), the buyer’s Realtor is almost always paid by the seller. If you’re pursuing a for-sale-by-owner property, that seller might pay your Realtor from his proceeds of sale, but perhaps not. Some sought-after Realtors will ask home-buyer clients to enter into a customer service agreement that lays out how your Realtor will be paid and the services s/he will provide. Most often the seller pays, although your buyer’s Realtor’s duties are entirely to you.
Go shopping. With price limit, location, size, number of bedrooms, type of parking and other criteria established, it’s time for your Realtor to show you suitable condo homes. This should be a relaxed process during which you learn a lot about what you get for your money in which locations, and the Realtor should have ready answers for all your condominium-related questions. The best condo-specialist Realtor will have a personal list of condo buildings he or she does not recommend.
Make a choice. When it comes time to write a deposit cheque, you should know why you’re buying the home you’re buying and know why you’re paying the price you’re paying. When you see the right one, act on it quickly, as the better homes sell fast. Carry your cheque book when you shop, and have $5,000 or even $10,000 available for a deposit, which should accompany your offer. Upon agreement with the seller, the listing brokerage will process the deposit cheque quickly, as it’s their job to confirm that the cheque is good. You’d be surprised how many deposit cheques bounce, although that alone does not invalidate an agreement for sale/purchase.
Write the offer. Your Realtor will prepare your offer to purchase, but decisions about what to offer and what conditions and terms to ask for are yours to make. The best Realtors will suggest several conditions to protect you, and might even propose terms that have bonds attached to them. One example condition of many that are possible will be for your ability to finance the purchase. If the lender does not approve your mortgage, or approve it at the interest rate you were expecting, you could withdraw from the purchase, in which case your deposit would be refunded to you with no deductions. An example term is that the seller will have the carpets professionally cleaned just prior to possession by you, otherwise $200 will be held back from the purchase price.
Deal with the conditions. Once you have agreement it’s time to deal with the conditions, such as for financing confirmation, for your satisfaction (or not) with the condominium documents, and for any others that might apply. Usually a week is allowed for these, during which time you or your Realtor or a consultant will review the condominium documents and your banker will approve the borrowing to buy that specific property. Rare is the Realtor who will help you to understand the condominium documents, but I believe it’s a fundamental service to condominium-buying clients.
Waive the conditions. If everything looks good and you’re confident to proceed you’ll “waive” or set aside the conditions to your purchase, which becomes “unconditional”. You commit to buy the home as agreed, and the seller commits to sell to you as agreed, even if someone else offers them more money (‘happens!). Now you sign your mortgage commitment letter so that the lender will send money to your lawyer, you give notice where you’re renting, and you book a moving company or your friend’s pickup truck.
Close the purchase. You attend with your lawyer to sign transfer of land and other documents too numerous to list here. Bring picture identification, as lawyers reduce mortgage fraud by confirming that you’re really the person borrowing the money and buying the home. Also bring your cheque book, and be prepared to cover the “cash to close”, being the rest of the money you’re personally investing, beyond the deposit.
At this time you’ll also put utilities into your own name, which in condo apartments is usually only the electrical service. You should arrange mail forwarding with Canada Post, and consult the property manager for move-in advice and perhaps an elevator lock-out key. While you have him or her on the phone, ask them to put your name on the intercom and to program in your phone number.
Not to be forgotten is buying property insurance to cover your liability and your furniture (“contents”), which is far less important than your liability at your new home. This insurance is affordable because the condominium building is insured against all risks, but you need to cover the damage for which you might be responsible.
Take possession. A good Realtor will be in regular touch towards your possession day, schedule your joint attendance at the property, and inspect it with you. Note that cleaning and filling of picture-hanging hook holes are not required in transactions unless it’s been agreed in writing between the parties.
Welcome home! Keep in mind that these points are only a summary, and a lot more goes on than this. There are countless possible circumstances I’ve not addressed here, but which a client-centered Realtor will raise with you. One large area of difference is in buying a new condo home, as builders use their own purchase forms, rather than the Realtor forms that we create through our professional association.
Calgary Condominium Directory
