Real Estate Law Frequently Asked Questions

As soon as you have found your dream home. The real estate market is constantly buzzing with activity and hence you should never take things too lightly. If you really like a particular house, do not ‘sleep on it’ but go ahead and make a decent offer before someone else does. Act quickly or else you might regret your casualness later on. When making an offer, there are a few things that you should consider. Firstly, make sure the asking price of the home is in line with the current market rate for similar homes. Secondly, you should determine whether you will have to spend a substantial amount of money on repairs. You can also enquire on how long the home has been on the market. If it has been on sale for a while, the seller might settle for a lower price. Considering all these factors, make an offer that is as close as possible to the asking price. There is always scope for negotiations in a real estate deal. But make the offer at the earliest before the opportunity slips away.

The total sum required to purchase a new home depends on a number of factors, including the cost of the house you intend to buy and the type of mortgage that you get. In most cases, you need enough money to bear the three main expenses of:

• Earnest Money – This is the deposit that is made on the home when making an offer to show the seller that you are serious about buying the house.
• Down Payment – This is a percentage of the cost of the house that you must pay when you want to book the place and start the settlement process.
• Closing Costs – These are the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be used to pay the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. Closing costs average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you can be well prepared to bear the expenses.

The answer to this question depends entirely on how much fixing is required to get the house back in flawless shape. Your real estate agent might have found you the home of your dreams but the seller has not quite done his homework right – the house has not been given the facelift that is required when presenting it for sale. With the help of your agent or maybe a professional home inspector, determine the amount of fixing up that is required in terms of costs. Be sure you keep a clear definition of the term “fixing up”. Major constructional repair work will not qualify as a fix-up job and in such a case, you should reconsider the purchase.

An appraisal is the valuation of your property by a professional appraiser to determine the value of your home in comparison to the current market trends. Most lenders want to see a professional appraisal of the property you want to buy before sanctioning the loan to ensure that the selling price is in accordance with the current market value of similar homes. This way, the lender is confident that he is not lending a sum that is much more than the value of the home. The cost of the appraisal will vary according to the complexity of the appraisal and the time taken to complete it. Appraisers use a number of techniques to establish the value of a property. Some look at comparable homes sold in the past six months, adjusting the prices to reflect differences between these homes and the property being appraised. If several similar homes have recently sold, the appraiser’s work is fairly simple. If your home is situated in a rural area, or in a neighborhood where there is mixed development the appraiser’s task is more complex.

The advantages of using a real estate agent are many, regardless of whether you are on the buying or the selling side of the deal. An agent is someone who has proper education and experience in the real estate industry and can provide the right type of guidance and advice that is required when buying or selling a property. As a home buyer, an agent can shortlist the properties that suit your budget and requirements and help you pick the best one. With their several years of experience, agents are better trained to locate faults in a particular construction. Agents also take care of the negotiation process and the paper work involved. From the seller’s point of view, an agent can get your house the kind of advertising it requires to initiate a quick sale. An agent can get your home listed on the Multiple Listing Service (MLS) which will advertise your house to the largest number of buyers in the least possible time. The agent will also negotiate with the buyers to get you the maximum profit from your property sale.

o make your mortgage application process as simple and lucid as possible, it is advisable that you collect all these documents beforehand so as to avoid any interruptions later.

• Personal information and identification such as your drivers license or passport.
• Job details, including confirmation and proof of income.
• Your sources of income.
• Proof of financial assets.
• Information and details of all your bank accounts, loans and other debts.
• Source and amount of down payment.
• Proof of source of funds for the closing costs (usually about 2.5% of purchase price).

The benefits of getting a pre-approved mortgage are many. First of all, pre-approval gives you an idea of what you can afford, making your search for a new home much simpler. It also does away with the tension of trying to find out what your monthly installments are going to be. Probably the greatest advantage of getting a pre-approved loan is that it allows you to lock in a rate. As the lender guarantees a fixed rate when pre-approving the mortgage, the borrower can secure that same rate even when the market prices climb up. In case a situation arises where the interest rates fall below those that were pre-approved, the lenders usually offer the lower rate.

A pre-approved mortgage is one that provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. The pre-approval is calculated on the basis of information provided by the borrower and is subject to certain conditions being fulfilled before the mortgage if finalized. These conditions usually include factors such as a written confirmation of employment and income among other things. Many brokers prefer it when their clients have a pre-approved mortgage as this gives a clear idea of the affordable price range when hunting for a new home.

In most cases, you will need to pay a minimum of 5% of the house value as a down payment. In addition to the down payment, you must also be able to show that you have the capacity to cover other closing costs such as the legal fees and disbursements, appraisal fees and a survey certificate. As a rule, at least 5% of the down payment must be from your own cash resources or a gift from a family member. This cannot be a borrowed amount. Several programs are available in the market that allow some alternate sources of down payment. The CMHC is one organization offering such programs. Certain lenders also accept gift money from a family member or friend as a down payment. However, such a sum needs a signed letter from the donor stating that it is a gift and not a loan. For any down payment that is less than 25% of the total value, a loan insurance from either the CMHC or GE is required.

A home inspection is a visual examination of a house by a qualified professional to determine the overall condition and value of the home. When conducting a proper inspection, an authorized home inspector should check all the major components of the house such as the roof, ceilings, walls, and floors along with other systems such as the electrical connections, heating, plumbing and drainage and weather proofing. The inspector usually gives the results of the inspection in writing to the home owner within 24 hours of the inspection It is always advisable to get a home inspection done before making a purchase decision. A thorough inspection is likely to clear a majority of the doubts that you might have when purchasing a home. The inspection gives an idea about the quality of the construction and indicates whether any major repair work will be required. This allows you to calculate all the add-on costs before making the final decision. An inspection will definitely give you a more secure feeling about your purchase decision by removing most of your doubts.

In a fixed rate mortgage, the interest rate is pre-determined at the beginning of the loan term, which can range from 6 months to 25 years. The advantage of this type of mortgage is that it offers a security of knowing your monthly payments beforehand and allows you to plan accordingly. In a variable or floating rate mortgage, the payments are fixed for a period of one or two years but the interest rates can fluctuate every month depending on the market conditions. If the interest rates drop, more of the payment goes towards reducing the principal; if the rates go up, a larger portion of the monthly payment goes towards covering the interest. The interest rate is based on a predetermined formula which is in-turn based on the prime-lending rate.

If you are paying child support and alimony to another person, generally the amount paid out is deducted from your total income before determining the mortgage amount that you would qualify for. If you are receiving child support and alimony from another person, the amount paid to you will be added to your total income before determining the mortgage that you will qualify for. However, you will be required to produce a regular receipt for the same for a set time period as specified by the lender.

To make your mortgage application process as simple and lucid as possible, it is advisable that you collect all these documents beforehand so as to avoid any interruptions later.

• Personal information and identification such as your drivers license or passport.
• Job details, including confirmation and proof of income.
• Your sources of income.
• Proof of financial assets.
• Information and details of all your bank accounts, loans and other debts.
• Source and amount of down payment.
• Proof of source of funds for the closing costs (usually about 2.5% of purchase price).

Some lenders may consider you eligible for a mortgage even though you have faced bankruptcy. However, this decision may vary from lender to lender and will greatly depend on the circumstances surrounding the bankruptcy. Certain measures can be taken by the prospective borrowers to improve their credit rating. Approach your mortgage broker for details.

The benefits of getting a pre-approved mortgage are many. First of all, pre-approval gives you an idea of what you can afford, making your search for a new home much simpler. It also does away with the tension of trying to find out what your monthly installments are going to be. Probably the greatest advantage of getting a pre-approved loan is that it allows you to lock in a rate. As the lender guarantees a fixed rate when pre-approving the mortgage, the borrower can secure that same rate even when the market prices climb up. In case a situation arises where the interest rates fall below those that were pre-approved, the lenders usually offer the lower rate.

A pre-approved mortgage is one that provides an interest rate guarantee from a lender for a specified period of time (usually 60 to 90 days) and for a set amount of money. The pre-approval is calculated on the basis of information provided by the borrower and is subject to certain conditions being fulfilled before the mortgage if finalized. These conditions usually include factors such as a written confirmation of employment and income among other things. Many brokers prefer it when their clients have a pre-approved mortgage as this gives a clear idea of the affordable price range when hunting for a new home.

A mortgage which is greater than 75% of the purchase price or appraisal, whichever is less, is known as a High-Ratio mortgage. A High-Ratio Mortgage requires mortgage loan insurance. Premiums for a mortgage loan insurance can range from 0.5% to 3.75%, depending on the value of the mortgage.

A conventional mortgage is one in which the down payment amount is equal to more than 25% of the purchase price (or where the loan value is less than 75%). Such a mortgage normally does not require mortgage loan insurance.

Mortgage Loan Insurance is an insurance cover provided to a lender against default on mortgage installments, when the down payment amount is less than 25%. Like any other insurance, mortgage loan insurance too requires premium payments. The premium amount can vary between 0.5% to 3.75%, depending on the insurance provider and how much of the purchase price is financed by the mortgage; greater the down payment, lesser will be the premium. Mortgage loan insurance is distinct from Mortgage Life Insurance as the latter guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.

In most cases, you will need to pay a minimum of 5% of the house value as a down payment. In addition to the down payment, you must also be able to show that you have the capacity to cover other closing costs such as the legal fees and disbursements, appraisal fees and a survey certificate. As a rule, at least 5% of the down payment must be from your own cash resources or a gift from a family member. This cannot be a borrowed amount. Several programs are available in the market that allow some alternate sources of down payment. The CMHC is one organization offering such programs. Certain lenders also accept gift money from a family member or friend as a down payment. However, such a sum needs a signed letter from the donor stating that it is a gift and not a loan. For any down payment that is less than 25% of the total value, a loan insurance from either the CMHC or GE is required.

To find out how much you will be able to pay for your new home, you need to analyze your taxable income along with the amount of debt that you have to pay off through monthly payments. If it is your main residence that you are going to purchase, calculate approximately 32% of your income to make the mortgage payment, property taxes and heating costs. Next, you need to calculate 40% of your taxable income and from that, deduct all of your other monthly payments such as car loans, credit card bills and other such debts. The lesser of these two calculations will be used to determine how much of your income may be used towards housing related payments, including your mortgage. Apart from what the ratios tell you, you should make calculations of your own to determine how much you can afford. If the payment amount you are comfortable with is less than 32% of your income you may want to settle for the lower amount rather than stretch yourself financially. Make sure you take all other expenses into consideration too so that you can easily afford the basic luxuries.

The total sum required to purchase a new home depends on a number of factors, including the cost of the house you intend to buy and the type of mortgage that you get. In most cases, you need enough money to bear the three main expenses of:

• Earnest Money – This is the deposit that is made on the home when making an offer to show the seller that you are serious about buying the house.
• Down Payment – This is a percentage of the cost of the house that you must pay when you want to book the place and start the settlement process.
• Closing Costs – These are the costs associated with processing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be used to pay the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. Closing costs average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you can be well prepared to bear the expenses.

An appraisal is the valuation of your property by a professional appraiser to determine the value of your home in comparison to the current market trends. Most lenders want to see a professional appraisal of the property you want to buy before sanctioning the loan to ensure that the selling price is in accordance with the current market value of similar homes. This way, the lender is confident that he is not lending a sum that is much more than the value of the home. The cost of the appraisal will vary according to the complexity of the appraisal and the time taken to complete it. Appraisers use a number of techniques to establish the value of a property. Some look at comparable homes sold in the past six months, adjusting the prices to reflect differences between these homes and the property being appraised. If several similar homes have recently sold, the appraiser’s work is fairly simple. If your home is situated in a rural area, or in a neighborhood where there is mixed development the appraiser’s task is more complex.

A home inspection is a visual examination of a house by a qualified professional to determine the overall condition and value of the home. When conducting a proper inspection, an authorized home inspector should check all the major components of the house such as the roof, ceilings, walls, and floors along with other systems such as the electrical connections, heating, plumbing and drainage and weather proofing. The inspector usually gives the results of the inspection in writing to the home owner within 24 hours of the inspection It is always advisable to get a home inspection done before making a purchase decision. A thorough inspection is likely to clear a majority of the doubts that you might have when purchasing a home. The inspection gives an idea about the quality of the construction and indicates whether any major repair work will be required. This allows you to calculate all the add-on costs before making the final decision. An inspection will definitely give you a more secure feeling about your purchase decision by removing most of your doubts.

This question might arise if your house has been on the market for several weeks without a proper offer coming your way. The price of your home is the most decisive factor for any home buyer. If you over quote, then chances are that your property will remain on the MLS for a few more months. Consult your agent when finalizing a price for your home. He can provide the best guidance by giving you a comparative analysis of other similar homes in your area. Price your home competitively and you will definitely attract the right buyers. Be realistic when fixing a price and not idealistic.

As a moral responsibility, it is important that you disclose any defects that might be present in your home. It is in the best interest of both the buyer and the seller that the entire process of the home exchanging hands goes off smoothly. If as a seller, you happen to conceal any major defects in your house, the buyer has the right to take legal action against you. This will not only sour relation between you and the buyer but also create further headaches and added costs in terms of legal expenses. Not disclosing defects in your house will also lessen your reputation as a trustworthy seller in the market. Most home buyers will conduct their own inspections of your home, usually with the help of a professional home inspector. If the defects come to light during such an inspection, word will spread quickly about how you did not give an honest picture of the property.