About Buying a Home
Buying a home is a big decision. It’s important to take your time and decide what type of home best suits your budget and lifestyle…a new or resale home, a single family home, condominium or co-operative. Your real estate agent will assist you in finding and viewing suitable homes, and guide you through the entire buying process. When you find a home you like, you begin with an Offer to Purchase. Your agent will prepare the offer and submit it on your behalf, but the agent’s loyalties are often divided between vendor and purchaser. It’s always best to have your lawyer independently review the offer on your behalf exclusively, before you sign it. If that’s not possible, your agent can make the offer conditional on your lawyer’s approval. Lawyers who specialize in real estate are often available outside office hours to review the Offer and suggest improvements to benefit you. Buying a property may be the biggest transaction of your life. Don’t take chances. Consult an independent real estate lawyer before you sign.
About Selling a Home
There are many things to consider when selling your home. You have to learn the true market value of your property and determine your asking price. You must decide how you want to list your home and market to prospective buyers, how you want to accept payment, and prepare your home for viewing. Your real estate agent and lawyer can assist you with the entire process, consulting with you, negotiating for you, and protecting your rights. Every transaction is unique. Every offer is different and every transaction is unique. When you receive an offer on your property, no matter how good it appears to be, have an experienced real estate lawyer review it before you sign your acceptance, or make a counter-offer or sign-back. Your lawyer may suggest changes that are to your benefit, or point out clauses that could pose a risk or hidden expense to you. Don’t take chances with your most important possession. Have an independent real estate lawyer review the offer on your property before you accept it.
Choosing a Real Estate Lawyer
Experience, reputation and comfort. When selecting a real estate lawyer, all three should be considered. Real estate is a highly specialized area of the law, so you want to make sure the lawyer on your side of the transaction is knowledgeable and experienced, and specializes in real estate. Your lawyer performs many functions… from consulting with you during the negotiating process, to ironing out all the details and delivering the keys at closing. Your lawyer is responsible for protecting your rights, and guiding the transaction from start to finish. Ask friends, relatives and co-workers about their real estate transactions. Always select a lawyer who you feel confident and comfortable dealing with, and one whose practice is heavily oriented to real estate. Once you have found someone with experience, reputation and people skills, try to spend a few minutes on the phone or in person with him or her discussing your particular transaction and needs.
There are a number of costs which must be paid on closing. First, there are adjustments of property taxes, condominium common expenses, tenant rent if any, and any flat rate water bills. These costs are usually divided between the buyer and seller and the calculations are based on the date of sale. Secondly, there are expenses or disbursements your lawyer has incurred on your behalf. Your lawyer will have to do a title search, zoning search, utility searches, sheriff searches and often other inquiries to make sure you have a clear title. In Ontario, it is not unusual for the disbursements or expenses in a residential real estate deal to reach $500, $600 or more, including the registration of a deed and mortgage. Be sure to budget for closing adjustments, disbursements and legal fees.
Conditional offers are Offers to Purchase that have conditions which must be met before the contract becomes binding. Today, conditional offers are common. In many cases, conditional offers specify that for the transaction to be completed, certain requirements must be met by specific dates and times. These conditions vary from offer to offer, and may protect the buyer, the seller, or both. An offer may be conditional on the purchaser being able to obtain suitable financing, on the home passing an inspection by a qualified home inspector, or on the buyer being able to sell his or her current property by a specific date. If the conditions aren’t met, the offer becomes void, and the purchaser’s deposit will be returned.
Condominiums come in different shapes and sizes. They can be townhouses, or suites in a high-rise building. When you purchase a condominium, you own your own unit, and share common areas and many expenses with other owners. Condominium projects are governed by a board of directors elected by the members. Board members supervise the management of the condominium, and report to the members every year at an annual general meeting. The board prepares a budget and sets common expense fees which cover expenses shared by all of the owners. Your exact share of the expenses is often determined by the size of your unit, and is set out in the condominium declaration. Not all condominiums are responsibly managed or healthy financially, and your lawyer will help you review documents like the budget and the estoppel certificate before you make a final commitment. Always consult with your independent real estate lawyer before you sign.
First Time Buyers
Buying a home is an extremely important decision, and whether you’re a first time buyer or not, you should get all the information and assistance you can. Experience shows that first-time buyers need more legal advice than a veteran homeowner. An experienced real estate lawyer will advise a first time buyer about what clauses to put in an offer, and what clauses to leave out. For example, you may want an escape clause that will allow you to cancel the offer if you find out the house is not what you thought it was, or if you cannot get a large enough mortgage. You will want a guarantee that the house conforms to municipal bylaws and housing standards, that it does not contain formaldehyde insulation or termites, and that the vendor will provide a survey which you will need for financing. The offer should also list exactly what items inside the house you are expecting to go along with the purchase. A real estate lawyer can save you from committing to a purchase that you will not be able to complete, or one you would have to complete on unfavourable terms.
Getting a Mortgage
If you’re not able to pay cash for your home…you should learn as much as you can about mortgages. Most home sales are conditional on the buyer arranging suitable financing. Financing options, terms and rates can be confusing… and vary from lender to lender. It is wise to shop around. Saving even a tenth of a percentage point, or making weekly or biweekly payments, can save you plenty of money over the long run. Many buyers obtain a “pre-arranged mortgage”, allowing them to look for a new home, knowing that they will be able to finance the purchase. Talk to various lenders, and obtain as much information as you can.
It is always necessary to have homeowners’ insurance, and it is important to review it yearly. Homeowners’ insurance protects your home and contents from risks such as theft, vandalism and fire. Replacement cost coverage is recommended, so that should a loss occur, you will be able to replace items that may have increased in value from the time they were initially purchased. These policies may also provide an amount to be used for living expenses, should your home become uninhabitable while damage is being repaired. Along with protection of structure and contents, homeowners policies can include liability insurance, offering some protection should another person sue you for injury or damages. Remember, if your home is under-insured, your insurance company will not fully compensate you for a loss. Many homeowners also carry life insurance which will pay off the mortgage in the event of death; and disability insurance, which will cover the mortgage payments if the owner is unable to continue working due to a disability. Finally, special insurance policies are available for condominium unit owners.
Land Transfer Tax
Land Transfer Tax is paid by the buyer. Whenever a property changes title in Ontario, this tax must be paid. It is separate from the annual municipal property tax, and is payable only once to the Government of Ontario. In Ontario, land transfer tax is payable on the purchase price at the rate of one-half of one percent on the first $55,000 and one per cent on the rest up to $250,000. Above that level, the tax jumps to 1.5 per cent, and on the price of single-family residences the tax on the amount over $400,000 is 2 per cent. Be sure to budget in advance for the Land Transfer Tax.
Negotiations can be difficult, complex, time-consuming, frustrating…and they can also be fun! Negotiations include a wide variety of items, which vary from offer to offer. Obviously, you will want to negotiate a fair price. You will also negotiate terms and conditions of the contract, including mortgage acceptance, closing dates, and possibly items in the home or on the property which are to be included or excluded from the sale. When buying or selling a home, just about anything is up for negotiation. It is wise to enlist the services of a qualified real estate professional to handle the negotiations for you, and consult a respected real estate lawyer to independently protect your rights. An experienced real estate lawyer can also help you negotiate interest rates and payment plans with your mortgage lender.
If you are buying a new home, you will usually be asked to sign the builder’s form of Agreement of Purchase and Sale. It is very important to have your real estate lawyer review the builder’s form of Agreement with you before you sign it. No two builders use the same forms, and they differ significantly from the standard Real Estate Board forms. In addition, builder’s agreements of purchase and sale are lengthy and often strongly weighted in favour of the builder – in terms of price, extras, delays, and even the obligation to complete the transaction. Hidden extras can cost hundreds – even thousands – of dollars. Whenever you buy a new home, make sure the builder is registered under the Ontario New Home Warranty Plan, and that the Goods and Services Tax is included in the purchase price. Builder offers are so complex that you can expect to spend between 30 to 60 minutes with your lawyer going over the terms in detail. It is always important to find an experienced real estate lawyer you can trust to provide legal advice and assistance on a builder’s Agreement of Purchase and Sale.
Offers to Purchase
An offer to purchase is the first step in creating the formal, written obligation to purchase a property. Offers are usually accompanied by a deposit cheque, which is held in trust by the real estate agent or lawyer until final closing. The offer sets out the price the purchaser is willing to pay, the suggested date of completion, any required documents – like a land survey – which the purchaser requires, the moveable items – such as appliances and drapes – which the buyer wants included, and any particular terms or conditions which the buyer wants satisfied before closing the deal. Most home offers are conditional on the purchaser obtaining financing and satisfactory inspections by a professional home inspector. If the purchaser already owns a home, the offer may be conditional on the sale of that property by a specified date. Your purchase offer may be accepted or rejected, or a counter-offer may be made by the seller. Once you sign and all the conditions are satisfied, you are legally required to complete the transaction. That’s why it is so important for both parties to consult their own independent real estate lawyers before signing the agreement, and before waiving or releasing any conditions.
Power of Attorney for Personal Care
If you are incapacitated, it is possible for another person… usually a spouse, friend or relative… to make decisions for you, regarding your personal care. Your attorney for personal care is appointed by you, in advance of any incapacity or incompetence, and is someone you trust to act in your best interests to make binding decisions for you. You might become incapable of making these decisions unexpectedly, as a result of an accident, or it might be anticipated as a likely stage in a progressive illness. Having a power of attorney for personal care is a way of organizing your affairs so that someone you trust will have the authority to decide about your health care, nutrition, shelter, clothing, hygiene and safety if you cannot. A power of attorney for personal care can also act as a living will, giving instructions about the use of mechanical life support systems or resuscitation in the event of heart failure.
Power of Attorney for Property
In some instances, such as a vacation, or family or medical emergency, you may be unavailable to participate in a real estate transaction or to sign cheques for personal expenses. Or, you may be in a situation where you are able to act for yourself but want someone else to act for you. In either case, you may wish to authorize someone under a Power of Attorney for property to act in your best interests and make binding decisions on your behalf. In your absence, for a specified time period, this person can legally sign any papers required for any financial decision which must be made for you. It is important that you communicate your wishes to the person you are appointing, and feel confident that that person will act in your best interests. A power of attorney automatically ends when you die. If you become incapable and do not have a power of attorney, the Public Guardian and Trustee may become the guardian of your property if no other interested person asks a court to be named your guardian.
Probate is the process by which a court certifies the validity of a person’s last will and testament. It is also a commonly used term for the process of liquidating and distributing the estate of a deceased person. In Ontario, a person named as Trustee in a Will applies to the Ontario Court for a Certificate of Appointment of Estate Trustee. If there is no will, an interested party can apply to the court for the Certificate of Appointment. He or she will then distribute the property to next-of-kin according to the provincial law. Once the court grants a Certificate of Appointment, the Estate Trustee has the legal power and obligation to liquidate and distribute the estate and property of the deceased. Fees payable to the court on the granting of a Certificate of Appointment are 1/2 of one percent on the first $50,000 of the estate value, and 1.5 per cent of the value in excess of $50,000. Property or money which is held jointly, along with the proceeds of RRSPs, insurance policies and some trusts are not included in probate and are exempt from the provincial fees that apply. The whole process is fairly complex, and an experienced estates lawyer can handle it for the Estate Trustee.
A survey. Don’t buy a home without one! A survey may seem like a needless expense, but it could save you a great deal of money and grief in the long run. A survey will reveal if other people are entitled to use any part of your property through easements or rights of way. It will tell you whether fences, trees, buildings, pools, additions, or even the front steps are actually on your property or if they stray over the property line. It will show the actual dimensions of the property, and whether the buildings are too close to the lot line to comply with the zoning bylaws. A survey will tell you whether your deed accurately describes your property and where to put any new fences or additions you may want to construct. An up-to-date survey is one of the most important documents in a real estate transaction. Make sure you have one.
Title insurance provides broad coverage for many of the risks associated with buying a home – problems that an up-to-date survey would reveal, zoning issues that would prevent you from living in your home, major work orders or bylaw violations against your property. Title insurance protects you should someone else claim an interest in or ownership of your property, and covers you for as long as you or your heirs own it. Title insurance also protects you should any outstanding liens or debts be discovered after your purchase. For a one-time premium, title insurance can cover a home owner for losses as a result of not having an up-to-date survey, having a property built too close to the lot line, or as a result of a fraudulent document registered on the title.
What is a will?
A will is a document in which you state what you want done with your property after you die. You can also name the person you want to settle your affairs. That person is called an Estate Trustee, a new name for an Executor. Your will can also name a guardian for your children if both you and the other parent should die. A will can be entirely handwritten, or it can be typed. Unless it is entirely handwritten, dated and signed, the will must be signed in front of two witness, who must also sign it at the same time. If you don’t leave a will, provincial laws set out which relatives will inherit your estate. If there are no relatives, your estate will wind up with the government of Ontario. Writing a will is a very complex process, and much litigation results from poorly drafted wills. A will prepared by an experienced lawyer is your best guarantee that your final wishes will be followed.
What to include in your will?
What you include in your will can help keep you property intact for your heirs. You are free to do what you wish with your property. However, the law does give your dependents – your spouse and your children – a right to ask for money from your estate if you do not leave them certain minimum requirements. When writing a will, select an executor, now called an Estate Trustee, who is trustworthy and very organized. Clearly state who is to receive your home, property and any other material possessions. You can also name the person you want to have look after your children if both you and the other parent die. If you get married, your will becomes invalid automatically and must be redone. If you get separated or divorced, you should review your will to make sure it is still accurate. A will prepared by an experienced lawyer is your best guarantee that your final wishes will be followed.