GUIDELINES FOR HOME BUYERS (PT. 2)

MORE GUIDELINES FOR HOME BUYERS

(Continuted from Part 1)

6)     Preparing and Making an Offer:

When you're on the brink of making a significant investment in a property, there are crucial steps to ensure your offer is compelling and well-informed.

                    I.       Review the Real Property Report (RPR): Before finalizing your decision, scrutinize the RPR, a legal document delineating property boundaries and structures in relation to these boundaries. Ensuring municipal compliance is crucial, guaranteeing that the property adheres to local Bylaws and Regulations. If no RPR is available, consult your real estate agent and lawyer for guidance.

                   II.        Conduct Thorough Research: Dig into the property's history by searching its address online. For condominiums, investigate the building/complex name. Historical listing searches unveil valuable insights into the property's listing past, providing context for your offer.

 

                 III.       Investigate Warranties and Representations: Explore Alberta's online registry for new home warranties. Understanding the warranty coverage can influence your decision-making process, offering peace of mind regarding the property's condition and potential repairs.

 

Crafting Your Offer:

                    I.       Offer Price: Your real estate agent will equip you with data, including comparable property sales in the neighborhood, aiding your decision on the offer amount. This choice is entirely yours and should reflect your assessment of the property's value. 

                   II.      Deposits: A substantial deposit signals your commitment to the purchase. Ensure you have the deposit ready when making your offer; it underscores your seriousness and financial preparedness.

                 III.            Terms:

·         Possession Date: Specify the date you intend to take possession of the property. 

·         Inclusions and Exclusions: Clearly outline items you want included (e.g., appliances) and excluded (e.g., curtain rods) from the purchase. Negotiate these terms with the seller.

·         Attached vs. Unattached Goods: Define items that can and cannot be removed without causing damage. This clarification prevents misunderstandings during the transfer of ownership.

·         Time for Acceptance/Expiry of Offer: Set an expiry date/time to create urgency for the seller, encouraging prompt consideration and potentially deterring competing offers.

·         Pre-Possession Inspection: Include a term allowing you, accompanied by your real estate agent, to inspect the property before possession. This inspection ensures the property's condition aligns with your expectations.

·         Conditions: Depending on the property type, add conditions such as a home inspection, financing approval, or review of condominium documents. Each condition must have a clear expiry date, providing you adequate time to fulfill these requirements. If conditions are met, the contract proceeds to a binding agreement; if not, the contract ends without obligations on either party.

By meticulously preparing your offer and understanding the terms, you enhance your chances of securing the property while safeguarding your interests.

7)     Negotiation

Negotiating a real estate deal is a nuanced process that involves several possible outcomes after you submit an Offer to Purchase. Upon submission, the seller can respond in various ways, shaping the course of the negotiation.

                    I.         Acceptance: If the seller outright accepts your offer, it's cause for celebration. If your offer had specific conditions, your real estate agent will guide you through fulfilling those obligations, ensuring a smooth transaction.

                   II.        Rejection: Should the seller reject your offer, you have two options. You can either submit a revised Offer to Purchase or explore other property opportunities elsewhere.

                 III.        Counter Offer: Alternatively, the seller might provide a counter offer. This entails a different selling price, but it can also involve adjustments in possession dates, inclusions/exclusions, and various terms or conditions. It's crucial to carefully analyze every aspect of the counter offer. If you wish to accept it, ensure you thoroughly understand the changes. If you want modifications, your response essentially becomes a counter offer to the seller.

                IV.        Ignoring the Offer: If the seller ignores your Offer to Purchase, it is akin to rejecting it. In this scenario, the decision on how to proceed lies with you. You can choose to submit a fresh Offer to Purchase or explore other available properties.

                  V.        Multiple Offers: In a multiple offer situation, where several buyers vie for the same property simultaneously, the seller holds the reins. They decide whether to disclose this situation to potential buyers. If such a scenario arises, your real estate agent will:

·         Inform you about the multiple offer situation.

·         Advise you on the seller's available options.

·         Make an effort to be present during the offer presentations.

·         Counsel you on your choices, which may include increasing your offer, maintaining it, withdrawing it, or reconsidering the fixtures, chattels, and terms of the offer.

·         Provide guidance on strategies that could enhance your position, such as including a condition compelling the seller to address the offer promptly or face withdrawal. Another tactic could involve requiring the seller to maintain confidentiality regarding price and terms, lest they risk the offer being withdrawn.

Navigating negotiations in real estate demands careful consideration and strategic decision-making to secure the best possible outcome for all parties involved.

8)     Waiving Conditions

Ensuring that your accepted offer aligns with your requirements involves a meticulous process of satisfying and potentially waiving specified conditions. If your offer was contingent on certain factors, it's crucial to address each condition appropriately.

        I.          Financing: If your offer hinged on securing financing, it's essential to confirm this aspect before proceeding. Your lender or mortgage broker will require essential documents such as the accepted Offer to Purchase, the property's listing sheet, Real Property Report (for single-family homes or bare land condos), and the current property title. It's imperative to carefully review the mortgage commitment provided by your lender, considering any conditions they might impose. These conditions should be thoroughly evaluated before deciding to waive the financing condition.

Example: If your lender stipulates specific requirements, like additional documentation or adjustments to loan terms, carefully assess whether these conditions are acceptable to you before moving forward. 

       II.            Home Inspection: If your offer included a home inspection condition, engaging a licensed home inspector is the next step. A home inspection provides a professional evaluation of the property's major components, including electrical systems, heating/air conditioning, roof, and foundation. The inspector will present a detailed report outlining their findings, which might reveal issues needing attention.

Example: If the home inspection uncovers issues like a faulty electrical system or a damaged roof, it's essential to discuss these concerns with both the home inspector and your real estate professional to assess the impact on your decision to proceed. 

     III.            Condominium Document Review: For condominium purchases, a crucial condition involves reviewing condominium documents. These documents pertain to the condominium corporation's operation, financial stability, management, and property maintenance. A comprehensive set of documents, including financial statements, bylaws, meeting minutes, and engineering reports, need to be scrutinized to ensure the condominium aligns with your expectations.

Example: A professional reviewer can assist in analyzing the condominium documents, highlighting potential concerns such as financial instability or restrictive bylaws, enabling you to make an informed decision about your purchase.

    IV.            Meeting Conditions: If all conditions are met to your satisfaction, and you are prepared to proceed, your real estate licensee will provide a waiver for you to sign. However, it's crucial to emphasize that if you do not waive these conditions, the initial Offer to Purchase becomes void. In such a scenario, neither party holds further obligations toward each other.

Important Note: It's paramount to exercise extreme caution before waiving any conditions. If you decide to waive and later opt out of the purchase, you risk losing your deposit and potential legal consequences. Therefore, only consider waiving conditions when you are entirely confident about moving forward with the transaction, fully understanding the implications of your decision.

9)     Possession of Property

In preparation for taking possession of a property, one of the crucial steps is engaging with a real estate lawyer. This legal expert plays a pivotal role in guiding you through the intricacies of property acquisition. During your consultation, the lawyer meticulously dissects the legal documents, such as the Real Property Report (RPR) and the title, shedding light on any potential restrictions or encumbrances associated with the property. They also delve into aspects like closing expenses and disbursements. Furthermore, your lawyer facilitates the signing of documents necessary for transferring the property title to your name after advancing the purchase funds to the seller. To facilitate this process, ensure you bring photo identification to your meeting; some lawyers might necessitate two forms of identification, so it's prudent to confirm the specifics with your lawyer. 

Title Insurance: One critical topic your lawyer will delve into is title insurance, a safeguard against unforeseen issues related to the property's ownership. Think of it as a standard insurance policy that shields you from potential future revelations about the property. There are two primary types of title insurance:

1.       Lender’s Title Insurance Policy: This policy, typically paid for by the borrower, exclusively benefits the mortgage lender. It’s often a requirement set by the lender. This insurance covers the loss of interest in the property due to legal defects.

2.       Owner’s Title Insurance: This separate policy, with premiums covered by either the buyer or seller, protects the buyer’s equity in the property. It covers various issues, including future title fraud. For instance, if someone illicitly loses title to a property due to fraudulent transactions, this insurance assists in reclaiming the rightful ownership.

Once the legal aspects are in order, you enter a waiting period leading up to the possession date. During this phase, several practical tasks demand attention:

·        Forward Your Mail: Arrange for your mail to be redirected to your new address via Canada Post to ensure you receive all important correspondence. 

·        Utility Set-Up: Schedule the connection of essential utilities such as electricity, gas, and cable to guarantee a smooth transition into your new home.

·        Home Insurance: Secure home insurance, effective either from the possession day or your moving-in date, depending on which is earlier. This coverage is vital for safeguarding your property against unforeseen events.

·        Moving Arrangements: If you’re utilizing a moving company, this is the time to finalize arrangements to ensure a hassle-free relocation experience.

Additional Closing Costs: Apart from legal fees and title insurance expenses, there might be other closing costs to consider. One notable cost is property tax adjustments. Due to the intricacies of property tax calculations, you might need to reimburse the seller for a portion of the property taxes they've paid to the municipality in the current year. Your lawyer can provide detailed insights into these additional costs. It’s advisable to consult your real estate agent for market-specific information regarding expected expenses in your area.

10)     Possession Day

Generally, possession takes place, and you receive the keys, typically around noon on the possession day. If you've included a pre-possession inspection clause in your Offer to Purchase, your real estate agent will coordinate this with the seller's representative. The inspection might occur during the possession or on the morning of possession day, a detail to be negotiated during the offer process.

During the possession inspection, your focus should be on ensuring that the property maintains a condition substantially similar to when you submitted your Offer to Purchase. This means confirming that attached fixtures remain in place, along with any additional items specified in your offer. Additionally, appliances should be in proper working order.

Regarding cleanliness, while you can expect the property to be in a similar state as when you purchased it, there's no strict requirement for the seller to meet a specific cleaning standard.

Once you've officially taken possession and you notice discrepancies – such as the property not being in the condition you expected or if items have been removed without your consent – it's crucial to contact your lawyer promptly. Such issues become legal matters between you and the seller. Typically, the money has already been transferred to the seller by the time you receive the keys. While your real estate agent can attempt to address the problem with the seller's representative, if the situation isn't resolved to your satisfaction, your best course of action is to consult your lawyer for further assistance.

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