How much of a deposit do I have to give when I make an offer?
This depends on the type of property you are purchasing and how you are purchasing the property. For instance, if you are purchasing a property between $250,000 and $300,000, we recommend a down payment of $3,000 to $5,000. The larger the purchase price of the property, the more the down payment should be. For purchases over $400,000 we would recommend a minimum down payment of $5,000. The down payment may also be an item that the seller wants to negotiate. The seller may expect a larger down payment to ensure your commitment to the purchase.
When is the deposit payable?
The deposit is payable immediately after your offer is accepted by both parties. The deposit is given to the Real Estate company that has listed the property and is held in a trust account until you take possession. Our suggestion to our clients is that they provide us with a cheque at the time we write the offer.
Can I lose my deposit?
Generally speaking, the only time you can lose your deposit is if you remove conditions on your offer and do not take possession of the property as agreed in your contract. If you CANNOT fulfill the conditions in the contract (i.e. you are not approved for financing) your deposit will be returned to you, provided your financial institution will provide a letter to the seller and their agent stating you are not approved for financing.
Other Costs Related to the Purchase
How much money will I need for other costs besides my down payment if I purchase a property?
At minimum, we estimate that you can expect to pay $3,000 for basic items such as:
- lawyer fees and disbursements which usually cost between $1,200 to $1,500
- property tax adjustments which can cost between $200 to $1,000
- home inspection - approximately $400
- title insurance – approximately $250
There could be other costs associated with your purchase depending on your situation. The costs listed above are general expenses that most buyers will incur.
Can I get back into the house before the possession date (to take measurements, pictures, etc.?
Technically, no. There is no provision in the contract to allow for you to re-enter the property until you take possession. If you must re-enter the property, you can have your real estate agent write this into your contract as a term of the offer. Our recommendation is that you take measurements and pictures as quickly as possible. The closer to possession it gets, the more chaotic your new home will look while the sellers pack to get out in time. It is in everyone's best interest to ensure that any re-entry into the property is done shortly after all conditions have been removed.
Working with a Real Estate Agent
When should I start actually looking at homes with a real estate agent?
As soon as you are pre-approved by your bank or a mortgage broker, you can begin looking at homes. We would not recommend looking at homes prior to getting pre-approved because you may find something you fall in love with and then find out you do not qualify to purchase it!
Do I have to call the real estate agent that has the house listed to view the house?
No! In Alberta, any real estate agent can show you any house that is listed on the MLS® System. If you have chosen to work with a real estate agent, your real estate agent would prefer to show you the property rather than you calling the real estate agent who listed the home. Remember, real estate agents are paid based on a commission basis. So, if you are working with multiple agents the only real estate agent who will get paid is the one that writes the offer with you.
How do I choose a real estate agent to work with?
Choosing a real estate agent can be a difficult task. In Central Alberta there are over 500 licensed real estate agents. Like any profession, real estate agents are not all created equal. Here are our recommendations:
- The more transactions an agent has completed, the more experience they are going to have. Do not let the number of years an agent has been in the business fool you. An agent could have 10 years experience, but have only done a few deals in each of those years. The higher the number of transactions an agent completes in a single year, the more experience they should have gained, which in turn, benefits you. Ask how many deals the agent has completed in a year and how this compares with his or her peers.
- Look through websites and see if there are testimonials posted. Do the testimonials give you an indication of what you can expect from the agent you are considering hiring?
- Interview more than one real estate agent to get a feel for what different agents have to offer.
- Find out if the real estate agent is part-time or full-time.
- Find out what types of technology the real estate agent uses (eg. Internet, e-mail, text messaging, etc.).
- Ask how many assistants the real estate agent uses. More might not always be better in this business.
Writing an Offer
How much do I offer?
This really depends. It depends on 4 factors:
- The current asking price of the property
- If there are other offers competing with your offer to purchase the property
- How important the property is to you
- Whether the market is a buyers’ market or a sellers’ market
This is where the expertise and honesty of your real estate agent comes in. You must trust your real estate agent and feel confident that they are providing reliable information. As part of the services we provide to our clients, we assess the asking price based on comparable sold properties for the area.
Although every real estate agent will have their own negotiating style, there are a few general concepts you should understand:
- There is no magical percentage for offers. For instance, not every offer should be 10% below the listed price. Some may be less and some may be more. It depends on how reasonable the asking price is.
- Not every seller has to sell their home. Some sellers will be more motivated than others. There are sellers who list their property just to see how much they can get for their property and may not be willing to negotiate a price much lower than what they are asking. There are other sellers that must sell and may be more willing to negotiate the price.
- Be prepared to walk away. It is important for you to determine what the highest price is that you are willing to pay for the property. If the property is priced too high, then be prepared to walk away.
- Competing offers require a much different strategy. You will need the advice and experience of your real estate agent to know how to handle this type of situation.
For Jan. 2012 to Nov. 2012, the average sale price was approximately $315,000 and was approximately $7,500 under the current asking price (for all property types in Red Deer). 51.7% of the properties that sold, were sold for a price that was between 0% to 2% under the asking price. For example, if the house was listed at $300,000, it would have sold between $294,000 and $300,000. Just 1.6% of the properties sold (which is 24 properties), were sold for 10% or more under their asking price and none of those properties sold for over $330,000. Of those 24 properties that sold for more than 10% under the asking price, 16 sold for $200,000 or less.
If my offer is too low, can my offer insult a seller?
In our opinion, yes it can. If your offer is too low, a seller may decide that they will not even counter your offer. We do not recommend a low offer if you really want the property. If you decide to drastically change your offer, the seller could interpret this as desperation and you could end up paying more for the property than if your offer was more reasonable the first time.
What if I don't find anything I like in my price range, should I look at houses over my price range in case there is a reduction in the price?
Normally we suggest that it is reasonable to look at homes that are $5,000-$10,000 over your price range but not more than this. You will be very disappointed if you find a house that is more than you can afford and the sellers will not budge on price! For example, if you are approved up to $350,000 and you are looking at houses in the $365,000 price range, it could be that the houses at $365,000 have already had $30,000 in price reductions so it could be difficult to negotiate the price down to $350,000. Our suggestion to our clients is that we assess these properties on a case by case basis.
If I find a house I like, how do I make an offer?
This is where the expertise and experience from a real estate agent is required. You can expect to spend approximately one hour getting the paper work together and signing the "Offer to Purchase". This is where the negotiation begins. It is important that you are available either by telephone or in person in the event a counter offer is made from your offer. Once the offer is accepted by the seller, any changes to the contract must be initialed by both parties.
What happens after my offer has been accepted?
Assuming you have placed conditions on your offer, you will have timelines to fulfill these conditions before the property is sold. The nature of the conditions will determine what is required.. Here are some general conditions:
- Financing condition – your mortgage broker or bank will need to have the information for your purchase immediately! As a service to our clients, we fax a copy of the offer, along with a copy of the MLS® System listing to your mortgage broker or bank, on your behalf.
- Home Inspection – a property inspection will need to be booked if a certified home inspector is going to be used. As a service to our clients, we will arrange the appointment with the home inspector that our clients choose.
What are conditions in an offer?
Conditions allow for a set amount of time for the buyer to get things in order without being penalized or legally bound to purchase the property. Conditions also ensure that the buyers deposit is protected. If you can not fulfill your conditions (for example, the bank will not provide you with financing) then your deposit will be returned to you!
What are some of the standard conditions?
A few of the standard conditions are:
- Financing Condition – this gives time for the buyers’ mortgage broker to confirm that the lender will provide funds for the purchase
- Property Inspection Condition – this gives time for the buyers to have an inspector review the property
- Condo Document Review Condition – this ensures the buyers receive the condo documents from the seller and gives time for the buyers to read through these documents and seek legal advice
- Sale of a Buyer’s Home Condition – this allows the buyers time to sell their own property
How much time do I get for conditions and finalize the offer to purchase?
Typically you will receive between 5 to 7 business days to get your finances in order, have a property inspection completed or review condo documents.
Is there more paperwork after I make the offer?
Usually there is. If you placed conditions on your offer, you will have to remove those conditions once you have fulfilled them. There is a form called a "condition removal" that has to be signed by all buyers to remove conditions. If you have a variety of condition dates, then you may have to sign several condition removals to remove each condition. There may be amendments needed to the contract as well. For instance, if the seller and the buyer agreed to change the possession date, an amendment would have to be done to make the change.
Do I have to use a lawyer to complete my transaction?
Yes, you must use a lawyer for this transaction when working with most real estate agents. Your lending institution may also require that you use a lawyer regardless of whether you purchase your property through a real estate agent or through a “for sale by owner”.
When do I sign the papers with the lawyer?
Approximately one week before you take possession of your home, the lawyer's office will call you to set up an appointment. You must be prepared to make this appointment a priority in your schedule as these documents are extremely important. Without these documents, the funds can not be transferred and you will not be able to take possession of your property.
Who sends the paperwork to the lawyers and when does it go to the lawyer?
The Real Estate office that listed the property will send all the paperwork to both the seller's lawyer and the buyer's lawyer. It will be sent to the lawyers’ offices AFTER all conditions have been removed. As a service to our clients, we will follow up with the lawyer’s office to ensure they have received all of the paperwork they require.
What do I need to bring with me to the lawyer?
Generally speaking, lawyer will require:
- 2 pieces of ID for each person that is listed on the mortgage documents. One piece of ID must have a photo. The recommended pieces of ID are a driver’s license and a major credit card or social insurance card.
- A void cheque – for your lending institution to withdraw your monthly mortgage payments from your bank account.
- A certified cheque or bank draft with the cash to close. Generally speaking, the cash to close is the rest of your down payment including the lawyer’s fees and disbursements, title insurance and any property tax adjustments.
- Proof of insurance on your new home.
Utilities, Insurance & Property Taxes
When should I get the utilities set-up for my new house?
We would recommend getting these in place as soon as your offer becomes unconditional. You will have to call each utility company (gas, power, telephone and the city or town for garbage and water) to get the accounts updated with your information.
What do I need to do for insurance?
We would recommend getting your insurance in place as soon the conditions are removed on your offer. The lawyer will require proof of insurance prior to your lending institution releasing your mortgage, so the sooner you can have this in place the better. Also, make sure that your insurance company faxes the information to your lawyer.
How are my property taxes paid?
This is an important conversation to have with both your mortgage broker and your lawyer. Normally, property taxes are paid in full once per year. Most cities and towns in Central Alberta allow you to make monthly payments but you must ensure you have filled in the appropriate paperwork. Red Deer's monthly property tax program is called T.I.P, which is short for tax installment plan. Go to this link for more information: City of Red Deer - Tax Installment Plan
Do I have to get a home inspection?
It is not required by law, but as your real estate agent we highly recommend that you have a home inspection completed. A home inspector can provide an objective visual inspection of the property to determine future maintenance issues with key components of your property, such as electrical, plumbing, heating and even potential water problems. This is also a great way for buyers to determine what types of maintenance costs they can expect over the short term.
What is the cost of a home inspection in Red Deer?
We would suggest you budget $400 for a home inspection in Red Deer for a standard property such as a townhouse, half-duplex or single family home. If the property has more than one dwelling (eg. a single family home with two suites), there will be additional costs. For a home inspection outside of Red Deer, there are additional costs for travel.
How do I arrange a home inspection?
As a part of the services we provide to our clients, we will arrange a home inspection on your behalf. You may find your own home inspector or we have the names of 3 home inspectors that we can recommend.
Can I be at the house while the home inspection is going on?
Absolutely! We recommend that our clients are present for at least the last 30 minutes of the home inspection. This gives our clients the opportunity to go through the home inspection with the inspector and ask any questions they may have. Since the home inspection will take anywhere between 2 and 3 hours, most of the inspections will take place in the morning or early afternoon, while trying not to inconvenience the sellers too much. Ensure you are able to make accommodations in your schedule to be present for at least the last 30 minutes of the home inspection.
When do I pay for the home inspection?
Payment must be provided immediately after the inspection. Most home inspectors will accept cash, cheque or VISA.
What time will possession happen?
According to the contract, possession is to happen at noon but given the complexity involved in the transfer of the funds, this rarely happens. We tell our clients not to expect to take possession until 2pm.
What happens on possession day?
As part of the services we provide to our clients, we do a walk through of the property PRIOR to our clients taking possession. That way, if there are any major problems, we can try to have them addressed immediately. We will arrange a time to meet you at the property on possession day. Upon that meeting, we will do a walk through of the house, ensuring all the items that were listed in the contract have remained in the house. We will also turn on appliances to make sure they work, run the taps, flush the toilets, turn the showers on, etc. to make sure everything is in good working order. We will make sure you have information such as alarm codes and mail keys. And then the house is all yours!
What happens if something is broken when I take possession?
Legally, the contract indicates in section 4.2, "When the buyer obtains possession, the property will be in substantially the same condition as it was in when this Contract was accepted." So legally, the buyer has the right to sue the seller if the property is not in substantially the same condition. In our experience, if there is a problem, the first step is for the real estate agents to work with their clients to find a mutually beneficial solution to resolve the issue(s). If this is not possible, the problem escalates to the lawyers. In our experience, the lawyers attempt to work with their clients to find a mutually beneficial solution. If this does not work, then the buyer would sue the seller. Most times, the seller is reasonable and prepared to take responsibility for any problems that are found on the day of possession. It should be expected that if a seller has listed their property with a real estate agent, the agent has educated their client as to the responsibilities they have as a seller. As a part of the services that we provide to our clients, we give our sellers a checklist of items to have completed by possession day.
Does the house have to be clean when I take possession?
No. There is no provision in the contract to force the sellers to ensure the house is cleaned before you move in. You can expect that on possession day, the house will look similar to the same condition you saw it when you viewed the property. Everyone has a different definition of clean so expect to spend the first day cleaning rather than unpacking!
How do Real Estate agents get paid?
If the property is listed on the MLS® System, the buyers' real estate agent is paid by the commission set by the sellers' real estate agent on each property. The buyer would not be responsible to pay any commission in this instance.
How does it work?
It is pretty simple. When we represent you to buy any house listed for sale by any real estate agent, we provide you a cash back on your possession day. It is that easy!
Where does the money come from?
It is the seller who pays both the listing commission and the selling commission. When we earn the selling commission for representing you in the purchase, we feel we should share this money with you!
Does it have to be a property you have listed for sale?
No way! Any property that offers a commission to us for representing you will qualify.
When is my down payment due?
Your total down payment is not due until you see the lawyer to sign all of the paperwork. This typically happens a week or two before possession day. The only money that is payable when you write the offer is the deposit.