Home Buyers Guide

 The purchase of a home is one of the most important decisions made by individuals and the entire process from making the decision to purchase through to the closing of the transaction may seem complex. The guidance and assistance of professionals including the Lawyer, Real Estate Agent and Mortgage Loans Officer will, however, usually serve to guide you through the process with a minimum of confusion. The following is an outline of some of the things you need to know.

THE AGREEMENT

It may be called an Agreement of Purchase and Sale or an Offer to Purchase and it is a Contract between a seller (Vendor) and a buyer (Purchaser). In order to be legally enforceable it must be in writing, it must identify the parties, the property and the purchase price. It will also stipulate a date by which the transaction must be concluded (the “closing date”) and this will normally coincide with the date when you take possession of the property. If the purchase price you are offering for the property is also to include any additional items such as appliances, draperies and drapery rods, et cetera, these should be listed in the Agreement. The Agreement will also normally stipulate that a deposit must be made and you must remember that if the Vendor accepts your Offer to Purchase and you fail to complete the Agreement your deposit may be forfeited, and the Vendor may have additional legal rights against you, unless your failure to complete the transaction is justified under one or more of the terms and conditions clearly set out in the Agreement.

The foregoing represents the bare essentials of an Offer to Purchase but your willingness and ability to purchase the property may very well be subject to certain additional terms and conditions. The more common of these are:

1. A condition in your Offer to Purchase that the appraised value of the property is equal to or greater than the stipulated purchase price. Such appraisals are carried out by qualified Real Estate Appraisers who assess market value. An Appraiser is not “inspecting” the property on your behalf but is establishing its “market value” which involves, in part, a comparison of the features of the property in relation to similar properties. If you intend to mortgage the property such an appraisal may be required by the lender.

2. If your financial ability to purchase the property is dependent upon obtaining a mortgage your Offer to Purchase should stipulate that it is conditional upon your arranging satisfactory mortgage financing. The Agreement will normally contain reference to a certain specific time period for arranging financing (and fulfilling any other conditions which you have included in your Offer) and the responsibility for meeting such deadline dates should be noted carefully. Failure to meet such deadlines could result in the Agreement being cancelled.

3. If your ability to purchase the property is dependent upon your sale of a property your Offer to Purchase should clearly specify the property to be sold and that your purchase is dependent upon the completion of such sale. Again, a Vendor may impose time, or other restrictions, associated with such a condition on your part.

4. The importance of carrying out a full and complete inspection of a property before you sign an Offer to Purchase cannot be over emphasized. Aside from a limited warranty which may exist on certain new or recently constructed homes, there is normally no other warranty associated with your purchase of residential property. If you do not feel qualified yourself to properly inspect the property, or if as a result of your own inspection you have concerns, you may wish to include a condition in your Offer that it is subject to a satisfactory inspection with respect to structural, or other matters, by a qualified professional. A Vendor who may accept your Offer with such a condition will normally stipulate a time in which the inspection must be completed.

5. If the property is in a rural area and is not serviced by a municipal water and sewer system it would be prudent to address this issue in the Agreement since reasonable assurances may be required that the water and sewer system is adequate and complies with existing standards.

Once you have determined the basic terms and conditions of your Offer to Purchase, and before you sign the Offer to Purchase, you may wish to meet with the Lawyer who will represent you in the transaction to review the proposed Offer and address any questions or concerns.

WHAT HAPPENS NEXT?

After the Agreement of Purchase and Sale has been signed by both parties, a copy will be provided to your Lawyer and you will make the necessary arrangements to secure your financing for the purchase and compliance with any of the other conditions forming a part of the Agreement. In relation to mortgage financing, the lender will require a copy of the Agreement of Purchase and Sale and arrangements will be made for an appraisal of the property.

Your Lawyer will begin the process of obtaining the necessary information to investigate title to the property, confirm with you the name or names and the manner in which you wish to hold title, and co-ordinate matters associated with your mortgage of the property. Title information will be obtained from the Vendor’s solicitor and your formal mortgage approval will be obtained from the mortgage lender. Your Lawyer will conduct searches at all appropriate registries to ensure there is a properly registered sequence of ownership to the property, that any registered claims, liens or mortgages are released or will be released on the closing date, and that you are obtaining good and marketable title to the property. Your Lawyer will also:

1. Review the survey of the land and any existing plan which shows the location of the dwelling or other structures on the property. Such a plan is sometimes referred to as a Real Property Report or a Location Certificate and it is prepared by a licensed surveyor. A fully complete Real Property Report will show the land size, the placement of the dwelling and other structures, fence lines, and easements which may legally permit access onto the land by utility companies, or others. Additionally, it should disclose any encroachments onto the land by adjoining owners. Mortgage companies generally require an up to date Real Property Report or, alternatively, a Title Insurance Policy. Your lawyer will review this matter with you before the closing date.

2. You will make the necessary arrangements to place insurance coverage over the property and your lawyer will advise you with respect to any specific requirements of your mortgage lender. Satisfactory proof of insurance must be provided to your lawyer before your mortgage funds are obtained.

3. The status of taxes with the municipality will be determined and it is not unusual for taxes to be pre-paid on properties which will result in an adjustment in the Vendor’s favour on closing.

THE CLOSING DATE

This is the day when the financial arrangements for the purchase are fully completed, legal ownership is transferred from the present owner to you and you take possession of your home. On or before this date your lawyer will have:

1. Completed all title investigations and reviewed the Deed of Conveyance.

2. Arranged the execution of all documentation associated with your mortgage.

3. Prepared and reviewed with you the closing statement(s) which will credit you with any deposit, reflect any adjustments between yourself and the Vendor with respect to taxes, rentals for tenants (if applicable), and any other adjustments, and itemize all legal fees, expenses and any other costs associated with the closing.

4. Obtain from you the balance required to close. Since funds will be disbursed by your Lawyer on the closing date, balances must be provided in the form of a certified cheque or bank draft.

5 Arrangements will be made for a final inspection of the property before authorization is given for the release of the purchase price. The purpose of the final inspection is to confirm that there has not been any damage to the property from the time you agreed to purchase it and that any items included in the purchase price are in the residence or on the property. The inspection is for this purpose only and it is not intended as an opportunity for you to raise matters not previously addressed at the time of your decision to purchase the property. We normally recommend that you be accompanied on the final inspection by the Real Estate Agent and once the inspection has been completed it is extremely important that you notify your Lawyer immediately since the purchase price and the Deeds are held pending your confirmation that the inspection was satisfactory.

6. Your Lawyer will attend to registration of the Deed transferring ownership and the mortgage at the appropriate Registry.

AFTER THE CLOSING DATE

Your Lawyer will forward to you the original registered title Deed and copies of other documents and submit final reports and documents to your mortgage lender.

 

IMPORTANT: The information provided in this brochure is intended as a general commentary only and must not be viewed as legal advice with respect to any specific transaction. The facts of each transaction may alter the application of these general comments or involve the application of legal principles not referred to in this commentary. Legal questions relating to a specific transaction should be directed to your Lawyer.

The Law Offices of Easton Hillier Lawrence Preston 61 Elizabeth Drive Gander, Newfoundland A1V 1G4 (709) 256-4006 Fax: (709) 651-2850