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Avoiding Common Real Estate Mistakes: A Guide to the Pitfalls of Buying a Home

Posted on November 26, 2025

Introduction

Avoiding Common Home Buying Pitfalls: Your Strategic Advantage

Over the years, we have shared comprehensive guides for both home buyers and sellers. This guide takes a different approach, focusing on the common home buying pitfalls that can derail even the most promising home purchase.This includes a closer look at the home buying pitfalls that every buyer should be aware of.

Buying a home isn’t just about finding the right property, it’s about avoiding the wrong decisions. Many buyers rush in unprepared. That often leads to regrets, delays, or financial surprises.

This guide is your strategic advantage. It outlines the most frequent pitfalls, how to avoid them, and how to move forward with confidence and clarity. Whether you’re a first-time buyer or a seasoned mover, what you don’t know can cost you, but it doesn’t have to.

What are your Long-Term Plans?

As you embark on the home buying process, it’s essential to assess your financial situation and set realistic mortgage expectations. You should also evaluate your long-term goals, preferred neighbourhoods, and property requirements.

Equally important is understanding the legal considerations, market trends, and timing that affect your decision. Clear communication and defined roles among all parties will help the process run smoothly. This includes your real estate agent, lawyer, and other home buying stakeholders.

Setting expectations and deadlines helps prevent misunderstandings, while proactive planning keeps the transaction on track and ensures that critical steps aren’t overlooked.

Why Planning Matters in Home Buying

Buying a home is one of the biggest financial decisions in your lifetime. It requires careful planning and informed decision-making.

This guide provides a roadmap to help you anticipate challenges and apply best practices.

Avoiding Planning Pitfalls in Home Buying

Buying a home can feel exciting and overwhelming. It’s a big financial decision. Without a clear plan, small missteps can quickly become costly setbacks. In business, major initiatives rely on structure and expert guidance to succeed. The same applies to a home purchase.

According to the Project Management Institute (PMI), strong planning leads to significantly higher success rates and fewer problems. When applied to real estate, it helps prevent financing delays, sales agreement missteps, and stressful surprises at closing. With the right plan in place, buyers feel more confident and more prepared. They are also far less likely to overlook critical details that could cost them later

A Planning Method That Helps You Avoid Common Home Buying Pitfalls

One tool that helps buyers plan more effectively is the PDCA (Plan-Do-Check-Act) framework. Originally developed for business process improvement, PDCA offers a practical, flexible approach to planning. It is especially useful in complex decisions like buying a home.

When applied to real estate, PDCA helps buyers stay focused and adjust when needed. PDCA also helps them avoid common pitfalls that come from unclear or incomplete plans.

Why Planning and Teamwork Matter in Home Buying

Even small missteps in the homebuying process can lead to setbacks. A well-organized plan keeps everything on track. It also ensures your team, including your mortgage lender, real estate agent, lawyer, and home inspector, stays aligned.

Buying a home involves many stakeholders, legal considerations, and financial factors. Whether you’re a first-time buyer or have experience in real estate, it helps to understand what to do and what to avoid. That knowledge supports informed decision-making.

Legal requirements, market trends, and negotiation strategies all play a role in preventing costly mistakes. They also help ensure a smoother transaction.

To help you navigate confidently, this guide is broken into six sections:

The Power of Planning and How PDCA Enhances Your Strategy.
Common Pitfalls to Avoid When Buying a Home.
Securing Your Home: Avoiding Mistakes in the Offer Process.
The Role of a Lawyer in Real Estate: Common Pitfalls and Best Practices.
Next Steps: Avoiding Pitfalls and Applying Best Practices in Real Estate.
Additional Resources: Expand Your Knowledge.

Each section will explore potential risks, best practices, and strategies from a buyer’s perspective.

Why Some Pitfalls May Appear More Than Once

Throughout this guide, you may notice that certain topics resurface in different sections. This is by design.

Many of the most common home buying pitfalls are connected. The best ways to avoid them often involve overlapping strategies like better planning, early professional involvement, or stronger communication.

To make this guide as useful as possible, we’ve included tailored advice at each stage of the process. Some solutions may sound familiar, but the context and timing are what make the difference.

Whether you’re just starting out, making an offer, or preparing for closing, you’ll find guidance that speaks to your situation. This guide does so without losing sight of the bigger picture.

Final Thoughts

Many of the challenges home buyers face, including financial surprises, overlooked legal details, and missed deadlines, don’t happen by chance. They happen because the plan was either unclear, incomplete, or never adapted as circumstances changed. In real estate, just like in business, poor planning creates unnecessary risk.

That’s why the first section of this guide introduces a proven framework for better planning. It is called ‘The Power of Planning and How PDCA Enhances Your Strategy.’ You won’t need to master the framework. Understanding how to apply it still makes a meaningful difference. It helps you avoid common home buying pitfalls, stay on track, and feel more confident in your decisions.

Let’s begin with a closer look at how structured planning improves every part of your journey, and why effective planning is the foundation of a successful home purchase.

1. The Power of Planning and How PDCA Enhances Your Strategy

The PDCA (Plan-Do-Check-Act) framework was originally developed for quality management in business.

In this guide, we’re using PDCA as a structured approach to help strengthen planning during the home buying process. It also reduces the risk of common pitfalls.

In real estate, PDCA can help buyers stay organized, avoid pitfalls, and make confident, informed choices.

Applying the PDCA Framework to Home Buying

Here’s how PDCA helps structure the home buying process, making it more organized and less stressful:

Plan – Lay the Groundwork. Research the market, clarify your goals, and prepare for what’s ahead. A well-thought-out plan reduces stress and costly missteps
Do – Take action. Engage trusted professionals like a real estate lawyer, real estate agent, and mortgage expert early in the process. Their guidance helps ensure you’re making informed choices
Check – Review and Verify. Think of this as a progress check-up, double-check contracts, financing, inspections, and legal requirements. Catching issues early helps prevent bigger problems later
Act – Finalize Decisions or Adjust Your Approach. If something doesn’t go as planned, reassess and restart the cycle. Adaptability is essential. Real estate decisions may not follow a strict step-by-step path. At times, they require reassessment as new details emerge, leading to a repeated cycle

Why PDCA is More Than Just a One-Time Process

PDCA isn’t just a one-time process. It is a continuous improvement tool that allows you to refine your approach, avoid pitfalls, and make confident choices at every step.

Whether you’re new to home-buying or a seasoned homeowner, applying this framework may help you navigate the market. It can give you greater strategy and confidence.

While the market can be competitive, a structured approach to planning reduces uncertainty and helps you achieve your real estate goals.

By applying the PDCA framework, you can stay organized, adapt quickly to new information, and make more confident decisions. This clear, flexible method may help you stay on track and reduce the chance of costly oversights. It may also help ensure your plan stays aligned with your goals.

Final Thoughts

Many home buying mistakes don’t happen simply because people overlook parts of the process. They happen because the plan wasn’t flexible enough to handle real-life complexity. That’s where PDCA comes in. This adaptive planning approach supports better decision-making, earlier course correction, and stronger coordination with your real estate team. With the right framework in place, you’re not reacting to problems. You’re anticipating them, avoiding them, and moving through the buying process with greater clarity and confidence.

2. Common Pitfalls to Avoid When Buying a Home

Understanding Common Home Buying Pitfalls

Buying a Home Is More Than Finding the Right Property

Buying a home is one of the most important and financially significant decisions you will make. Whether you’re purchasing in Toronto, the Greater Toronto Area (GTA), or anywhere in Ontario, it’s essential to consider every aspect of the process. This includes financial planning, legal obligations, market trends, and property inspection

Start with Financial Clarity and Trusted Guidance

Begin with Financial Clarity

Start by assessing your financial situation and setting realistic mortgage expectations. Early engagement with professionals such as a lawyer and a real estate agent may provide valuable guidance as you begin the home buying process.

Why Early Preparation Matters

Many common home buying pitfalls begin long before an offer is made, which is why early preparation matters.

Establishing clarity early in the process provides helpful context and supports stronger decision-making. Their guidance may help you make informed choices. Seeking advice early often helps you avoid misunderstandings and reduces the chance of unnecessary issues later in the process.

Moving from Preparation to Best Practices

While there are common pitfalls that many buyers face, simply avoiding mistakes isn’t enough. A proactive approach, including implementing best practices, is necessary for a smooth and successful home purchase.

This section highlights common pitfalls and the steps you may take to avoid them. It also offers essential strategies that may guide you toward a stronger outcome in the home buying process.

Understanding and addressing pitfalls, incorporating key avoidances, and applying best practices may help you confidently navigate the home buying journey. This guidance supports you from start to finish.

The combination of careful planning, active engagement, and thorough review will ensure you make informed, well-thought-out decisions throughout the process.

Common Home Buying Concerns on Buyers’ Minds

What Buyers Are Most Worried About

Home buyers have many factors and concerns on their minds prior to and during the home-buying process. These concerns can include:

Can I afford to buy a home, make the payments, and cover upkeep and maintenance?
How can I lock in a mortgage rate before rates rise?
Will I qualify for a mortgage, especially with rising interest rates?
How do I avoid overpaying or purchasing beyond my means?
Where should I live? What will the neighbourhood be like? Will it be close to work and essential amenities?
Will my home’s value drop?
Am I budgeting for ongoing maintenance costs?
Will the home I’m buying have hidden issues I can’t afford?

Why Income Stability Matters

One factor that deserves more attention is your career prospects and job security. How secure do you feel in your job or career? What about your future income? It’s important to ensure you’re financially prepared for the long-term commitment of homeownership.

Buying a home is a significant financial decision, and you don’t want to stretch your budget beyond your means. Your future income and your down payment play key roles in determining mortgage costs and affordability.

Make sure you’re comfortable with both the upfront costs and the ongoing financial responsibilities before moving forward.

Common Mistakes Many Buyers Make

As mentioned earlier, buying a home is a major financial and legal decision. Yet, many buyers fall into common traps, including:

Failing to work with professionals early in the process (e.g., a lawyer or real estate agent)
Not getting pre-approved for a mortgage
Rushing important decisions without careful thought
Skipping a home inspection
Letting emotions drive their decisions
Overpaying for the property
Skipping essential due diligence checks
Forgetting to budget for additional costs, including closing costs
Ignoring long-term needs such as family growth, proximity to schools, and career advancements
Entering into agreements without fully understanding them

All these factors can lead to regrets, turning what should be an exciting milestone into a stressful and costly experience.

Rushing decisions, overlooking key financial details, or failing to secure professional guidance may leave buyers feeling unprepared and vulnerable. However, taking a structured approach can help mitigate these risks.

How PDCA Helps Reduce These Risks

Home buyers often move through the process while juggling financial decisions, legal requirements, inspections, and timing.

With so many moving parts, it can be easy to feel overwhelmed or to overlook important steps.

A structured approach helps reduce that uncertainty and may prevent important steps from being overlooked.

The PDCA framework brings order to each stage of the home buying process, helping you plan ahead, review key details, and adjust your approach when needed.

By relying on a consistent method, you may lower the risk of costly errors and make more confident, well-supported decisions. The PDCA framework can help structure the home buying process strategically, reducing risks and supporting clearer choices throughout your journey.

A Strategic 4-Step Approach to Avoiding Home Buying Pitfalls

Step 1: PLAN – Lay the Groundwork for a Successful Home Purchase

Why Planning Is Essential in the Early Stages

Many home buyers can make costly mistakes before they even begin house hunting. Failing to plan properly may lead to financial strain, lost opportunities, or legal complications.

There are numerous potential pitfalls buyers may encounter during the home buying process. These five are among the most prevalent and significant in the initial stages.

Being informed and working with trusted professionals may help mitigate these risks.

Common Pitfalls in This Stage

❌ Pitfall 1.1. Delaying Professional Involvement

Delaying professional involvement is one of the most common home buying pitfalls.

Many buyers wait too long to involve a real estate lawyer, real estate agent, or other key stakeholders. This delay may lead to missed opportunities, unclear contract terms, or even costly legal complications.

✅ How to Avoid This Pitfall

Engage Professionals Early

Engage professionals early in the process by researching and connecting with a real estate agent, lawyer, home inspector, and financial advisor. Avoiding this mistake starts with building your team from the beginning. This helps ensure you have expert guidance at every step of the home buying journey.

This proactive approach allows you to get clear advice on your budget, potential properties, and contracts, helping you make informed decisions.

Working with a knowledgeable real estate agent can provide valuable market insights, neighbourhood comparisons, and negotiation strategies. Your lawyer and financial advisor can protect your legal and financial interests. A qualified home inspector adds another layer of protection by identifying potential issues early. This helps ensure you fully understand the property’s condition before committing.

Having the right professionals in place may help you avoid costly mistakes. Their involvement can also support legal, financial, and property-related decisions being made with greater confidence.

❌ Pitfall 1.2. Not Getting Pre-Approved for a Mortgage

Skipping mortgage pre-approval is a recurring home buying pitfall.

Many buyers assume they’ll be able to secure financing once they find a home. They may face disappointment if they don’t qualify for the loan amount they need or if interest rates have shifted in the meantime.

✅ How to Avoid This Pitfall

Get Pre-Approved for a Mortgage Early

Before you start your home search, work with a mortgage broker or lender to secure pre-approval. This gives you a clear understanding of your budget. It also strengthens your position when making an offer, showing sellers that you’re a serious buyer.

Keep in mind that mortgage pre-approval is not the same as final approval. Pre-approval provides an estimate of what you may qualify for. Final approval depends on factors such as the property appraisal, lender underwriting, and the conditions set out in the Agreement of Purchase and Sale.

Pre-approval helps you avoid this common mortgage-related home buying mistake. This also prevents you from wasting time looking at properties outside your price range. You can then move forward with offers and negotiations more confidently.

❌ Pitfall 1.3. Underestimating Total Costs

Underestimating total costs is a notable home buying pitfall that leaves many buyers financially unprepared.

Property taxes, legal fees, closing costs, land transfer tax, and future maintenance expenses are often overlooked in early planning. This may lead to stress or financial strain after closing.

✅ How to Avoid This Pitfall

Create a Comprehensive Financial Plan.

Build a plan that accounts for more than just the purchase price. Account for closing costs, property taxes, insurance, legal fees, utilities, and ongoing maintenance. Overlooking these expenses is a common mistake many buyers make. This often leads to financial stress down the line.

By planning for both immediate and long-term costs, you’ll gain a clearer understanding of the full financial commitment of homeownership.

This clarity helps ensure you won’t stretch your budget too thin. It also allows you to make a sound, sustainable investment in your new home.

❌ Pitfall 1.4. Failing to Research Market Trends

Failing to research local real estate trends is a frequent home buying pitfall that can lead to poor timing and overpayment.

Buyers who don’t analyze pricing shifts, demand cycles, and competitive activity in their desired area may end up making offers under the wrong market conditions. This risks both money and missed opportunities.

✅ How to Avoid This Pitfall

Research Market Trends Before House Hunting

Taking a closer look at market data helps you avoid common buyer mistakes that may lead to overpayment or missed opportunities

Take time to study recent sales in your target neighbourhood. Review broader market indicators such as pricing fluctuations, infrastructure changes, and community growth.

Whether the market favours buyers or sellers will shape your offer strategy. In a seller’s market, you may need to move quickly and offer competitively. In a buyer’s market, you may have more room to negotiate. Understanding these dynamics sets realistic expectations for your budget, helping you avoid financial overreach.

This level of preparation makes you a more confident buyer and positions you to make informed decisions aligned with your long-term goals.

Your real estate agent can provide valuable insight into local trends and pricing strategy. Leveraging their expertise may help ensure your offer is both competitive and well-aligned with your financial goals.

❌ Pitfall 1.5. Choosing a Home Based on Emotion Instead of Logic

Choosing a home based on emotion instead of logic is another home buying pitfall. Buyers may fall in love with a property’s design or charm. They may overlook key issues like structural integrity, location drawbacks, or long-term financial feasibility.

Letting emotion lead the decision can result in regret and unexpected costs down the road.

✅ How to Avoid This Pitfall

Evaluate the Home Objectively

Evaluate homes objectively to avoid costly buyer mistakes. It’s natural to be drawn to a property’s aesthetics. That being said, emotion-led decisions can overshadow more important factors like structural condition, location, and long-term value.

Define your needs and must-haves upfront, and create a checklist based on logic, not impulse. Focusing on resale potential, neighbourhood stability, and financial fit may help ensure the home you choose supports your goals. This applies both now and in the future. By staying grounded in reason, you’ll make a more confident and sustainable decision.

Final Thoughts

Starting your home buying journey with a clear, well-researched plan is crucial in reducing the risk of costly mistakes. This approach helps set the foundation for a successful purchase.

A strategic approach begins with securing pre-approval, planning for all potential expenses, and thoroughly researching market trends. Maintaining an objective view of properties can help you align your decisions with both your immediate needs and long-term goals. This may position you for a smoother, more confident transaction.

Many buyers jump in without clarity on their finances or a clear strategy, leading to unforeseen costs and missed opportunities. Taking the time to plan gives you greater control and confidence. This also strengthens your position in negotiations and helps ensure you’re making informed, financially sound decisions.

Step 2: DO – Approach with Caution and Due Diligence

Once buyers start viewing homes and considering offers, emotions can take over, leading to rushed purchases, waived conditions, and overlooked issues. These are just a few of the risks buyers face.

Additionally, buyers may encounter challenges such as misunderstanding financing conditions or assuming verbal agreements are legally binding. They may also overlook future development plans in the neighbourhood.

Common Pitfalls in This Stage

❌ Pitfall 2.1. Overlooking Home Inspections

Overlooking the home inspection is a typical home buying pitfall, especially in competitive markets.

Some buyers choose to exclude inspections to strengthen their offers. They may later uncover costly structural or mechanical issues after the purchase, problems that could have been caught early with proper due diligence.

✅ How to Avoid This Pitfall

Prioritize a Home Inspection

Prioritizing a home inspection, even in a competitive market, helps avoid making a costly home buying mistake. Partner with a trusted real estate agent or lawyer to structure your offer in a way that includes an inspection contingency. This helps you do so without weakening your position.

A detailed inspection gives you the insight needed to assess the property’s true condition and avoid unexpected repair costs.

This step provides peace of mind, protects your investment, and helps ensure your long-term satisfaction with the home.

❌ Pitfall 2.2. Neglecting to Review Legal Clauses in Contracts

Neglecting to review legal clauses in your real estate contracts is a common home buying pitfall.

Buyers who skip legal review of the Agreement of Purchase and Sale may miss important clauses that create financial risk or unclear obligations. They may also face legal disputes after closing.

✅ How to Avoid This Pitfall

Ensure Contracts Are Reviewed Before Signing

Always have a real estate lawyer review your contracts before signing to avoid buyer mistakes with serious legal consequences. Make sure all terms, conditions, and obligations are clearly understood in the Agreement of Purchase and Sale.

A lawyer will examine clauses related to financing, contingencies, timelines, and seller responsibilities, ensuring they align with your interests.

Legal review helps prevent financial surprises and contractual disputes by identifying risks upfront. It gives you peace of mind and helps protect your investment throughout the transaction.

❌ Pitfall 2.3. Ignoring Long-Term Affordability

Ignoring long-term affordability is a common home buying pitfall that can lead to future financial strain.

Many buyers focus too heavily on short-term costs or monthly payments. They may overlook how future lifestyle changes, rising expenses, or income shifts could impact their ability to sustain the investment.

✅ How to Avoid This Pitfall

Evaluate Long-Term Affordability

When buying a home, evaluate long-term affordability to avoid making a costly buyer mistake that could jeopardize your financial stability.

When setting your budget, consider future earning potential, lifestyle changes, and long-term goals. Make sure your home purchase leaves room for savings and unexpected expenses, so you’re not financially stretched down the line.

A smart plan balances your current capacity with the ability to manage future costs like property taxes, maintenance, and inflation. Setting a realistic budget that supports both today and tomorrow may help you maintain a sustainable and rewarding investment. This approach keeps your home affordable for years to come.

❌ Pitfall 2.4. Failing to Review a Condo’s Financial and Legal Standing

Failing to review a condo’s financial and legal status is a notable home buying pitfall, especially for first-time condo buyers.

Those who skip examining the status certificate may unknowingly inherit costly maintenance fees or unresolved legal disputes. They may also assume financial liabilities tied to the condominium corporation.

✅ How to Avoid This Pitfall

Examine the Condo’s Status Certificate and Financial Health

Protect your investment by examining the condo’s status certificate and overall financial health before making an offer.

Have a real estate lawyer review the status certificate, reserve fund, and any planned special assessments. This helps confirm the condo corporation’s financial stability and ensures you’re not blindsided by hidden liabilities, legal risks, or surprise maintenance fees.

A full review of the condo’s legal and financial standing protects your investment and gives you confidence in your decision, before you sign anything.

❌ Pitfall 2.5. Overlooking Property Boundaries and Zoning Restrictions

Overlooking property boundaries or zoning restrictions is a common home buying pitfall that can create major legal and financial headaches.

Failing to verify lot lines, land-use rules, or local zoning laws may lead to disputes with neighbours. It may also result in denied renovation permits or unexpected fines after closing.

✅ How to Avoid This Pitfall

Confirm Boundaries and Zoning Laws Before Making an Offer

Before making an offer, confirm property boundaries and zoning regulations. This helps you avoid costly buyer mistakes that could impact how you use the property. It’s essential to confirm that the property’s zoning authorizes your intended use. This includes any future plans, such as additions, secondary units, or redevelopment.

Request an up-to-date land survey to ensure the lot lines are accurate. Consult your municipality’s zoning bylaws to confirm your intended plans comply with local rules. If a recent survey is unavailable, your real estate lawyer can arrange title insurance. This helps protect you against losses arising from title defects, title fraud, or undisclosed liens.

A real estate lawyer can help interpret legal documents and spot red flags. Taking these steps helps protect you from future disputes, delays, or limitations. This may help ensure the property fits both your vision and your long-term investment strategy.

Final Thoughts

Rushed decisions and overlooked details can result in costly mistakes. Take the time to review home inspection reports, property surveys, contracts, and other critical property details carefully. These steps help minimize risks and allow you to make informed, thoughtful decisions.

It’s natural to feel emotional impulses. A thorough investigation of the property and a careful review of contracts can help you avoid financial and legal headaches. Working with experienced professionals, such as real estate agents and lawyers, can also help ensure your decisions align with your immediate needs. It may also support your long-term goals. This helps protect you from hidden liabilities.

Many buyers skip due diligence, which often leads to regrets. Collaborating with professionals, verifying property conditions, and researching neighbourhoods can help you avoid costly surprises. These steps may also help ensure the home you purchase truly meets your needs.

Step 3: CHECK – Review Key Details Before Finalizing Your Home Purchase

Before finalizing a home purchase, buyers should carefully review key details. This includes the home’s value in relation to the market, zoning regulations, and any issues uncovered during the inspection.

Emotional decision-making can lead to overpaying or overlooking critical factors, resulting in regrets later.

Common Pitfalls in This Stage

❌ Pitfall 3.1. Failing to Review Contracts

Failing to review contracts thoroughly is a recurring home buying pitfall that can lead to serious legal or financial consequences.

Many buyers assume everything is as agreed upon in the agreement. They later discover that clauses they intended to include or exclude were not reflected in the agreement. Failing to notice this omission may impose unexpected obligations or risks after the deal has closed.

✅ How to Avoid This Pitfall

Have All Contracts Reviewed by a Real Estate Lawyer

Have all contracts reviewed by a real estate lawyer before signing. This helps you avoid buyer mistakes that may arise from unclear or unfavourable terms.

Take time to read through the Agreement of Purchase and Sale, disclosures, and inspection reports. Do not hesitate to ask questions about anything that seems vague or uncertain.

A lawyer can help ensure the clauses reflect your agreements and protect your interests. This step helps you avoid legal pitfalls and gives you peace of mind throughout the transaction. It allows you to move forward with confidence.

❌ Pitfall 3.2. Overpaying Due to Bidding Wars

Overpaying in a bidding war is a frequent home buying pitfall that can lead to long-term financial strain.

Buyers often get caught up in competition and push past their budget or the property’s true market value. This may result in regret, reduced equity, or difficulty reselling later.

✅ How to Avoid This Pitfall

Set a Maximum Price Limit and Conduct a Comparative Market Analysis (CMA)

To avoid one of the most costly buyer mistakes, set a maximum price limit before entering a bidding war. Work with your real estate agent to determine the property’s true market value. Commit to staying within your financial boundaries.

A Comparative Market Analysis (CMA) will help you evaluate recent sales of similar homes in the area. This gives you a realistic baseline for your offer. Relying on facts over emotion helps reduce the risk of overbidding. It also helps ensure your purchase remains financially sound and aligned with your goals.

❌ Pitfall 3.3. Ignoring Future Resale Value

Ignoring future resale value is a common home buying pitfall. It can turn an otherwise comfortable home into a weak investment.

Focusing only on your immediate needs, without considering the property’s long-term marketability, may result in slower equity growth or difficulty selling later. This is especially true in shifting market conditions.

✅ How to Avoid This Pitfall

Consider the Long-Term Investment Potential of The Property

A smarter approach is to consider the long-term investment potential of any property you’re evaluating. Look for homes in established or up-and-coming neighbourhoods with strong resale history and market demand. Assess local real estate trends to understand future conditions that may affect property values.

Buying in a high-demand area increases the likelihood of solid resale value and steady equity growth over time.

Taking these factors into account may help protect your financial future. It also helps ensure the home you choose aligns with both your lifestyle and long-term goals.

❌ Pitfall 3.4. Not Verifying Zoning and Property Boundaries

Not verifying zoning rules or property boundaries is a recurring home buying pitfall. It can result in legal headaches or blocked plans.

Buyers who skip this step may later discover restrictions on renovations, additions, or intended use. These limitations may lead to delays, fines, or unexpected disputes.

✅ How to Avoid This Pitfall

Review the Title Report, Property Survey, and Zoning Regulations

To mitigate risks related to property restrictions, review the title report, zoning bylaws, and property survey before making an offer.

Confirm the lot lines and ensure there are no easements, encroachments, or zoning limitations that could impact your intended use.

Request an up-to-date property survey and verify compliance with local regulations.

A real estate lawyer can help you interpret these documents and flag potential legal concerns before you finalize your purchase. These steps reduce your risk of future disputes and ensure the property supports both your immediate plans and long-term goals.

❌ Pitfall 3.5. Not Reviewing Home Inspection Results Carefully

Not reviewing the home inspection report carefully is another home buying pitfall. It can expose you to costly surprises after closing.

Skimming over key findings may lead to missed repairs, safety concerns, or hidden structural issues. These are potential issues which could be resolved or negotiated before finalizing the deal if they are identified early.

✅ How to Avoid This Pitfall

Thoroughly Review the Inspection Report and Ensure a Comprehensive Home Inspection Before Closing

The best way to reduce costly buyer mistakes is to review the full home inspection report carefully. Discuss any concerns with the seller before closing. Keep in mind that sellers are not legally required to provide inspection reports or make repairs unless these obligations are negotiated and documented in writing. This is typically done through an Amendment to the Agreement of Purchase and Sale.

Buyers should research and engage a reputable, certified home inspector. Attend the inspection in person and review the findings together to fully understand the property’s condition. Ask the inspector to explain unclear findings. Ensure that necessary repairs, warranties, or seller obligations are included in writing.

Depending on the outcome of the inspection, buyers should consult their real estate agent to determine how any issues should be handled. These issues may be addressed by the buyer after closing, negotiated as a price adjustment or credit, or resolved by the seller before closing.

Negotiating for repairs or price adjustments upfront protects your financial interests and reduces the risk of unexpected costs later.

Your lawyer can help document these agreements properly to avoid post-closing disputes. A thorough inspection review gives you the insight you need to move forward with confidence and protect your investment.

Final Thoughts

Before making a final decision, reviewing key details is crucial to avoid costly mistakes. Staying within your budget, considering the property’s long-term value, and confirming zoning, property boundaries, and inspection results may help support your decision. This may help ensure your decision is well-informed.

Emotional attachment to a property can cloud judgment, often leading buyers to overlook critical details.

Taking the time to evaluate pricing, assess long-term investment potential, and verify legal conditions may help protect you from financial pitfalls. Carefully reviewing all documents can also support a sound, well-considered investment.

Step 4: ACT – Finalize the Purchase with Confidence

If everything checks out, financing is secured, inspections are complete, and all contingencies are met, you can move forward with confidence. This step signals that the key requirements of the transaction have been satisfied.

Even at this stage, last-minute issues can arise, making it essential to double-check all details before moving forward. From securing financing to confirming inspections, every detail matters in ensuring a smooth closing.

Common Pitfalls in This Stage

❌ Pitfall 4.1. Not Securing Financing on Time

Not securing financing on time is a common home buying pitfall that can jeopardize your entire purchase.

Delays in mortgage approval may result in missed deadlines or added costs. In some cases, they may even lead to default under the agreement, especially in competitive markets where timing is critical.

✅ How to Avoid This Pitfall

Ensure Financing is Secured Before Closing

To avoid buyer mistakes that could derail your closing, make sure your financing is secured well before the scheduled date. Work closely with your mortgage lender to confirm all documentation, approvals, and conditions are in place.

Finalize your loan application early and complete any required appraisal as soon as possible. Review your interest rate terms and clarify your payment obligations. On the day of closing, your lawyer must receive the mortgage funds and any other closing amounts. These funds must then be transferred to the seller’s lawyer before title registration can occur and keys can be released.

Delays in financing can cause unnecessary stress or put your deal at risk. By confirming everything ahead of time, you’ll ensure a smoother, more predictable closing and protect yourself from avoidable financial complications.

❌ Pitfall 4.2. Overlooking the Final Walk-Through

Overlooking the final walk-through is a recurring home buying pitfall that can result in costly surprises.

Buyers who skip this final step may miss new damage, incomplete repairs, or items missing from the agreement. They often discover these issues only after the deal has closed, when it is too late to negotiate.

✅ How to Avoid This Pitfall

Complete a Final Walk-Through

To reduce this exposure, always complete a final walk-through before closing. This last visit lets you confirm that agreed-upon repairs were completed. It also confirms that the property is in its promised condition. It also helps ensure all inclusions are still present.

Take time to check for any new damage or unresolved concerns and ensure the seller has met all their obligations. Promptly advise your real estate agent and lawyer about any deficiencies or issues.

A careful walk-through offers peace of mind and helps eliminate unpleasant surprises. It also confirms that the property meets your expectations before you commit to the purchase

❌ Pitfall 4.3. Underestimating Closing Costs

Underestimating closing costs is a typical home buying pitfall that can create last-minute financial stress.

Buyers who fail to budget for final amounts owed may face unexpected costs before closing. These amounts include inspection fees, taxes, insurance, legal fees, and disbursements. This situation can jeopardize the transaction or stretch their finances too thin.

✅ How to Avoid This Pitfall

Budget for Closing Costs Early

A strong preventive step is to estimate your closing costs early in the home buying process. Work with your real estate agent, lawyer, and mortgage broker to create a full breakdown of expenses. These expenses may include legal fees, land transfer taxes, title insurance, adjustments, and moving costs. This level of preparation helps ensure you are not caught off guard by unexpected closing-day expenses.

Land Transfer Tax is another cost that is often missed or underestimated by buyers. In Ontario, purchasers must pay Provincial Land Transfer Tax on closing. An additional Municipal Land Transfer Tax may apply in certain municipalities, such as Toronto. First-time homebuyers may qualify for partial rebates if they meet specific eligibility conditions.

A comprehensive budget improves your financial planning and reduces last-minute stress.

Before closing, review the final statement from your lawyer or closing agent to confirm its accuracy. Make sure you understand each line item. Being fully informed at this stage helps prevent financial surprises and supports a smooth, confident closing experience.

❌ Pitfall 4.4. Failing to Confirm Contingencies

Failing to confirm that all contingencies are met is another home buying pitfall. It can lead to serious delays or even derail the purchase altogether.

When buyers overlook financing, inspection, or contractual conditions, they may face legal, financial, or logistical issues just days before closing. At that point, it is often too late to fix these issues easily.

✅ How to Avoid This Pitfall

Ensure All Contingencies Are Fully Met

Avoid buyer mistakes that create last-minute stress by confirming that all contingencies are fully satisfied before moving forward with the purchase.

This includes financing approval, satisfactory inspection results, and fulfillment of any agreed-upon conditions or repairs.

Work closely with your real estate lawyer and agent to ensure everything is documented and verified. Overlooking even a small contractual detail can create major issues during closing.

Taking the time to confirm every contingency may help reduce risk and support legal clarity. This step also helps set the stage for a smoother, more confident transaction.

Final Thoughts

Most home buying mistakes arise from poor planning, rushed decisions, or overlooked details, not bad luck.

It is essential to work with a real estate lawyer. Their legal guidance may help support a smooth transfer of ownership and protect your interests throughout the process. By incorporating a structured approach, such as the PDCA framework, you can minimize risks and make confident, informed decisions.

Closing on a home is a significant legal and financial commitment. To support a seamless transition into homeownership, it is important to secure financing and prepare for associated costs. You should also review all documentation carefully and complete a final walk-through.

Collaborating with your real estate agent, lawyer, and other key professionals may help ensure that nothing is overlooked. This teamwork also supports a smooth closing process.

3. Securing Your Home: Avoiding Mistakes in the Offer Process

The offer process is one of the most critical stages in purchasing a home. It determines whether you secure the property and under what terms. Mistakes at this stage may lead to missed opportunities, financial strain, or even losing out on your desired home.

Given its importance, we’ve dedicated an entire section to addressing the common pitfalls that buyers face during the offer process. This allows us to explore key considerations like contingencies, negotiations, and market evaluations that can significantly impact your home-buying experience.

Understanding and addressing these challenges may help you approach the offer process with confidence and clarity. This preparation can help your offer stand out while protecting your financial interests.

A strategic approach, combined with a realistic budget, allows buyers to evaluate the market and understand the seller’s needs. Including key contingencies, such as home inspection and financing, ensures a well-rounded offer.

Paying attention to the details in this stage can prevent costly regrets and ensure you’re making a sound investment.

Common Pitfalls with the Offer Process

❌ Offer Pitfall – Making an Offer Without a Clear Budget

Making an offer without a clear budget is a common home buying pitfall that can lead to long-term financial stress.

In competitive markets, buyers may feel pressure to bid above their comfort zone. This decision can lead to affordability issues, tighter cash flow, or regret after closing.

✅ How to Avoid This Pitfall

Set a Realistic Offer Budget

Avoiding this costly buyer mistake starts with setting a clear and realistic offer budget before entering negotiations. Work with your mortgage broker or financial advisor to understand your approved mortgage range, interest rates, and monthly payment obligations.

This clarity ensures you don’t overextend yourself or make emotional decisions in a bidding war. A grounded budget supports long-term financial stability while keeping your offer competitive.

Your real estate agent may also provide pricing insight based on recent market trends. This guidance can help you remain confident and strategic throughout the process.

❌ Offer Pitfall – Not Verifying the Seller’s Situation

Not verifying the seller’s situation is a typical home buying pitfall. It can lead to a rejected offer or a missed opportunity.

Failing to understand the seller’s timeline, motivations, or conditions may result in an offer that feels out of sync. This is especially true in a competitive or time-sensitive market.

✅ How to Avoid This Pitfall

Understand the Seller’s Situation and Align Your Offer with the Seller’s Motivations.

Strengthen your negotiation power by understanding the seller’s situation and tailoring your offer accordingly.

With help from your real estate agent, assess the seller’s motivations, timeline, and financial expectations. Whether the seller needs a fast close, specific conditions, or price flexibility, these factors should guide your strategy. Aligning your offer with these needs may help it stand out without compromising your budget.

This strategic approach boosts your chances of success while maintaining control over your financial goals.

❌ Offer Pitfall – Overlooking Offer Conditions

Overlooking essential offer conditions is a recurring home buying pitfall that can leave buyers exposed to financial risk.

Failing to include key contingencies like financing, inspection, or appraisal clauses can limit your ability to renegotiate. It may also restrict your ability to exit the deal if issues arise. This may leave you in an unfavourable situation.

✅ How to Avoid This Pitfall

Include Essential Contingencies.

Avoid buyer mistakes that could cost you later, always include essential contingencies in your offer.

Financing, home inspection, and appraisal clauses give you the flexibility to renegotiate or walk away if conditions aren’t met.

These protections help safeguard your investment and reduce your exposure to risk. Work with your real estate agent and lawyer to ensure all contingencies are clearly written and reflect your needs.

This proactive step reinforces your position, protects your interests, and contributes to a smoother, more secure home-buying experience.

❌ Offer Pitfall – Rushing the Offer Decision

Rushing an offer decision is a common home buying pitfall that often leads to buyer’s remorse.

Emotional reactions made under pressure can result in a purchase that does not align with your financial situation, long-term goals, or practical needs. This can turn excitement into regret once the dust settles.

✅ How to Avoid This Pitfall

Take Time to Consider the Offer

To avoid buyer mistakes driven by emotion, take time to carefully evaluate the property before making an offer. Work with your real estate agent to assess its true market value and resale potential. You should also consider how the property fits your financial and lifestyle goals.

Consider how the home aligns with your broader vision, not just your current situation. A thoughtful, strategic approach helps you make a confident, informed decision that supports your long-term success. It may also reduce the chance of post-purchase regret.

❌ Offer Pitfall – Failing to Factor in Market Conditions

Failing to factor in current market conditions is another home buying pitfall that can lead to overpaying or poor timing.

Buyers who overlook local trends, pricing cycles, or demand patterns may submit offers that do not reflect the property’s true value. This mismatch can weaken long-term returns and create financial strain.

✅ How to Avoid This Pitfall

Leverage Market Insights for a Strategic Offer

One way to prevent this buyer mistake is to leverage market insights to guide your offer strategy. Stay informed about current pricing trends, inventory levels, and local demand.

Your real estate agent can help you evaluate comparable properties and analyze market data. This may give you a clearer sense of the home’s actual value.

With this knowledge, you can submit a competitive yet realistic offer that aligns with your financial goals.

A smart, data-driven approach reduces the risk of overpaying and helps you make a confident investment with long-term upside.

Final Thoughts

The offer process is a critical step in securing the right home at the right price. By addressing key pitfalls and implementing a well-thought-out approach, buyers can avoid costly mistakes and improve their chances of success.

A proactive mindset, combined with careful planning, helps buyers stay aligned with their budget, priorities, and long-term goals. Understanding the seller’s situation, including their timeline and motivations, helps strengthen your strategy. Including the right contingencies also helps create a more competitive and secure bid.

Working with knowledgeable professionals, including real estate agents and lawyers, ensures your offer is strong and legally sound. Verifying market conditions, reviewing comparable prices, and considering all elements before making an offer may help protect your financial interests. This careful approach can also support you in securing your ideal home.

Professional guidance can help buyers navigate this stage confidently and effectively. It also supports decisions that protect financial interests and increase the chances of closing on their dream home.

4. The Role of a Lawyer in Real Estate: Common Pitfalls and Best Practices

The Critical Role of a Real Estate Lawyer

A real estate transaction is one of the most significant financial and legal commitments you will make. Having a knowledgeable and experienced real estate lawyer is essential to ensuring that the process goes smoothly.

From the planning phase through to closing, a lawyer helps ensure that every aspect of the transaction is legally sound. This support helps protect your interests at every step.

Reviewing Contracts and Identifying Legal Risks

Legal guidance is particularly crucial when reviewing the details of contracts. It helps ensure that terms are clear, fair, and aligned with your best interests. Buyers should engage a lawyer early to handle title searches and review the Agreement of Purchase and Sale (APS). A lawyer can also address potential legal risks that may arise during the negotiation process.

Document Preparation, Compliance, and Closing Requirements

A lawyer’s role does not end with reviewing contracts. It extends to confirming that all required documents are in order before closing. A lawyer also manages the financial aspects of the transaction. They help ensure compliance with local regulations and taxes.

Ensuring Title Security and Protecting Against Legal Issues

A real estate lawyer is your safeguard against costly legal and financial mistakes. They provide expertise in dealing with complex legal language and verifying title. A lawyer also helps ensure that your rights are protected throughout the entire transaction.

Working with a lawyer from the outset helps reduce the risk of errors or misunderstandings that could delay or derail the deal.

Applying the PDCA Framework with Your Legal Team

The PDCA (Plan-Do-Check-Act) framework also applies to working with a real estate lawyer. You can plan your legal strategy early by consulting with a lawyer. You then take action by reviewing documents and contracts. Each term should be reviewed carefully for clarity. You can act with confidence by securing the deal with professional legal support.

Following this structured approach ensures a smooth and successful transaction while minimizing the risks associated with complex real estate deals.

Critical Insights

Engagement Timing: Buyers should engage a real estate lawyer early in the process to avoid legal pitfalls later on

Title and Ownership Checks: A lawyer’s responsibility includes verifying the property’s title and ensuring no encumbrances or disputes

Financial and Tax Clarity: Reviewing tax obligations and financial responsibilities before closing can prevent unexpected costs and complications

Contract Fairness: A lawyer ensures the Agreement of Purchase and Sale is fair, clear, and legally binding, protecting you from ambiguous clauses that could lead to disputes

Regulatory Compliance: A lawyer ensures compliance with local laws, zoning requirements, and taxes to avoid fines and legal issues

Final Thoughts

Legal oversight is one of the most important safeguards in any real estate transaction. A knowledgeable and experienced real estate lawyer can help reduce risk and support informed decision-making at every stage.

Working with a lawyer early in the process can help you avoid costly errors. Their review of contracts, title searches, and legal requirements ensures the transaction stays on track and aligned with your best interests.

A lawyer also provides clarity when navigating complex documents or unfamiliar terms. This support helps prevent misunderstandings and protects you from unexpected issues during closing.

Taking a structured approach, including PDCA, strengthens your planning and coordination with your legal team. This method may help you move forward with confidence and support a smoother, more secure transaction.

5. Next Steps: Avoiding Pitfalls and Applying Best Practices in Real Estate

Wrapping Up: What You’ve Learned and What to Do Next

Staying Flexible While You Navigate the Process

Home buying is more than following a checklist. It is about adapting to new information and making informed decisions. Preparation helps, but challenges may still arise. It is important to stay flexible and adjust your approach when needed.

Reducing Risks Through Best Practices

Understanding common pitfalls, applying best practices, and leveraging professional guidance can help you position yourself for a successful transaction. This guide has endeavoured to show you how to navigate each stage of the home buying process. These steps help reduce risk and support confident decisions.

Using PDCA to Strengthen Your Approach

Using the PDCA (Plan-Do-Check-Act) framework can be an effective way to minimize risks. It also helps refine your approach at every stage of the process.

The Power of PDCA in Real Estate Decision-Making

Buyers often face uncertainty, which can lead to costly mistakes. The PDCA framework helps reduce this uncertainty, providing a structured approach for better decision making.

Plan: Prepare thoroughly by researching, clarifying goals, and understanding the process
Do: Make informed decisions with professional support from agents, lawyers, and mortgage specialists
Check: Review all contracts, financing, inspections, and legal requirements carefully to avoid surprises
Act: Finalize decisions based on confirmed details, ensuring a smoother transaction

PDCA isn’t just for the home buying process, it’s a flexible approach that guides you through every decision with confidence.

Key Takeaways: Mastering Real Estate Pitfalls & Best Practices

Common Pitfalls Are Avoidable: Identifying typical mistakes helps you sidestep costly errors
Best Practices Lead to Stronger Outcomes: A structured approach helps you negotiate effectively and avoid setbacks
Legal Oversight is Essential: Review all contracts, negotiations, and closing documents with professional guidance
Financial Preparation is Key: Understand all costs and market trends to prevent financial strain
Professional Guidance Matters: Real estate professionals ensure a smoother, stress-free experience

Next Steps: Approach with Confidence

Plan Ahead: Research neighbourhoods, get pre-approved, and set realistic expectations
Work with Trusted Professionals: Consult a lawyer and real estate agent to protect your interests
Include Essential Conditions: Ensure home inspections, financing clauses, and legal reviews are part of your offer
Verify Everything: Always confirm contract terms, property details, and legal requirements
Act Decisively but Carefully: Double-check everything before closing to avoid surprises

Final Thoughts: Navigating Real Estate with Strategy and Confidence

To navigate the home buying process successfully, you need preparation, financial awareness, and expert guidance. Stay informed, verify details, and work with professionals to ensure your transaction goes smoothly. This approach helps avoid costly mistakes and sets you up for a sound investment.

6. Additional Resources: Expand Your Knowledge

Navigating real estate transactions requires ongoing learning, and having the right information at your fingertips can make all the difference. While this guide has provided a structured approach to home buying, additional insights can further strengthen your understanding and decision-making.

To help expand your knowledge, we’ve included a selection of resources covering key aspects of real estate transactions. Whether you’re preparing to sell your home, considering your next purchase, or seeking legal guidance, these articles offer valuable information to support your journey.

Sources and Links

Disclaimer

Sources and links are provided for source credit and attribution, and for additional information purposes only. Nichols Law is not affiliated, associated, authorized, endorsed by, or in any way officially connected with any of the sources or links provided.

Referenced Resources

Below are categorized resources that offer additional insight into topics related to this guide.

Government & Legal Resources

CMHC — Homebuying Step by Step

Ontario Government — What to Know Before Buying a Home

Association of Corporate Counsel — Top Ten Tips for Buying Real Estate in Ontario

Ottawa Sun — Agreement of Purchase and Sale Explained

Mortgage, Financing & Market Forecasts

WOWA — Canadian Housing Market Data (April 2024)

WOWA — How to Buy a House in Ontario (2025)

RBC — Early Signs of a Housing Market Upturn Emerge Across Canada

RBC — Canada’s Housing Market Outlook: A Tale of Two Halves (2024)

CREA — Quarterly Forecasts

Forbes — Best Time to Buy a House in Canada (2024)

CIBC — How to Avoid Closing Day Problems

Market News & Real Estate Insights

Global News — Canada’s Housing Market Is ‘Starting to Turn a Corner’

CBC/Yahoo — Where Ontario’s Housing Market Is Headed in 2024

CP24 — GTA Expected to Surpass Vancouver as Most Expensive Market (2024)

Toronto Star — When You’ve Got the Keys but the Sellers Haven’t Left

Home Buying, Selling & Representation Guides

The Brel Team — What to Know Before Buying a Home

Toronto Realty Boutique — 10 Things to Do Before Buying a Home

Golfi Team / ReMax — Homebuyer Checklist: 10 Tips for Ontario Buyers

MoveMeTo — Negotiating That Winning Real Estate Deal

MoveMeTo — Home Improvements: DIY or Call a Professional?

Decision-Making, Due Diligence & Inspection Resources

MoorMoney Media — Buyer Representation Agreement: What You Need to Know

MoorMoney Media — House Hunting Checklist

Real Simple — 8 Home Details That Turn Off Homebuyers

ReliablePlant — How to Overcome the 10 Biggest Mistakes in Decision Making

Bidding Wars, Rules & Offers

The Brel Team — Bidding War Rules, Best Practices & Etiquette (2024)

A Practical Guide to Selling Your Home

Posted on February 3, 2025

Introduction: Navigating the Home Selling Process

You’ve decided to sell your home. Whether you’re a first-time seller or it’s been a while since your last sale, the process can feel overwhelming. This guide on selling a home offers essential steps and insights to help you confidently navigate key requirements for a successful sale.

Common Questions Home Sellers Have

When selling a home, many sellers wonder about the logistics surrounding closing day and post-sale responsibilities. Common questions include:

What happens on the day of closing?
What do I do with my keys?
What do I need to disclose to the buyer in terms of house defects?
What happens if the buyer can’t close?

Financial and Administrative Considerations

In addition to the sale process itself, home sellers often need to deal with financial and administrative aspects related to the sale. These questions are essential for getting everything in order:

How is my mortgage dealt with?
When can I expect my money?
Who contacts the utility companies?
Who contacts the property tax department?
Do I need a survey?

Preparing for the Sale

To ensure a smooth process, it’s important to start planning early. We’ll try to answer these questions throughout this document and provide additional insights which may be beneficial with the preparation for selling your home.

Balancing the Emotional and Practical Aspects of Selling Your Home

Selling your home can be more than just a financial decision, it can also be an emotional experience. Even though you may have various reasons to sell, you may still feel a strong attachment to your home, which can add to the stress of preparing for the sale. This includes not only the transactional and contractual aspects but also the pressure of staging, decluttering, scheduling showings, home touch ups or renovations, and meeting with key stakeholders like lawyers and real estate agents.

We’re hoping that the information and insights in this guide on selling a home will help unburden some of the stress and feelings of being overwhelmed

Preparing Your Home for a Successful and Rewarding Sale

While selling your home can be a rewarding and exciting experience, it may also be one of the most significant and challenging transactions of your life. It can inspire you to declutter and get rid of unnecessary or unused belongings, move to a new home, and perhaps even relocate to a different area. There are many ‘moving parts’ involved in the home-selling process. If you want the best offers when selling a home, you may need to do some work on your property to ensure it’s ready for potential buyers.

Your home will need to have ‘curb appeal’, be clean and in top condition. Necessary repairs, landscaping, renovations or upgrades will also need to be completed prior to listing the home.

Smooth and Fulfilling Home Sale Process

While selling your home may initially seem like a daunting task, especially for first-time sellers, selling your home can be a smooth and fulfilling experience, with the right approach. By doing your research, seeking guidance and support from professionals, and being prepared, you can navigate the process with confidence and achieve a successful and rewarding outcome.

Guidance and Resources for a Smooth Home Sale Process

Although getting organized and preparing for your home sale may require time and effort, you won’t be alone in the process. In most cases, a real estate agent will guide you through the sale and transactions, and you’ll also need a lawyer to work alongside you and your agent to ensure compliance with government reporting, regulations, and real estate laws. We’ve also included additional resources in this guide which may be beneficial with your preparation efforts.

Key Considerations for Home Sellers

Selling your home can bring uncertainty about the sale price and how buyers and other real estate agents will perceive your property. You may find yourself asking questions including:

Will buyers find our home and location appealing?
Will we get our asking price?
How long will it take to sell?
Will we have time to find and move into our next home?
What if an inspector uncovers hidden issues, or we need to pay for additional repairs?

Comprehensive Guidance for Every Step of Your Home Sale

Although many of these concerns are beyond your control, with the assistance of a lawyer, a real estate agent, and other specialists, most real estate transactions—despite their complexity and occasional challenges are managed professionally, successfully, and in a timely manner.

Our goal with this guide is to assist you in researching and addressing questions related to selling your home. We’ll offer valuable insights throughout the various stages of this important life milestone, including sections:

Homeowner Factors to Consider Before Selling Your Home
Preparing Your Home for Resale
Home Selling Advisors: Working With Your Lawyer and Real Estate Agent
Home Selling: Understanding the Process of Receiving and Negotiating Offers
Home Selling Checklists: What Do I Do Next
Home Closing: What To Expect
The Role of a Lawyer with the Home Sale
Next Steps

Guide Outline and Additional Resources

In this guide on selling a home, we’ve aimed to provide as much information as possible. However, it’s challenging to cover every topic and detail related to selling your home.

We’ve left out insights related to the topic of marketing your home, which is also an important aspect of selling a home.

If you need additional or expanded information related to the topics we are covering, we have included a robust collection of source materials and link sources at the end of our guide within the Sources and Additional Information section, or alternatively you can always contact us at our office for further information or clarification.

1. Homeowner Factors to Consider Before Selling Your Home

This section will focus on the initial steps homeowners can take to prepare for selling their home, highlighting the top priority tasks. Additionally, while it’s important to find a recommended real estate agent, mortgage lender, and real estate lawyer early on, we will cover those topics later in this guide.

Homeowner Preparation

Preparing Your Home for Resale

In the next section, we will focus on preparing your home for resale, including enhancing its physical appearance and key attributes. Section one will

Reflecting on Your Motivation to Sell

One of the first, and perhaps most obvious, steps for a homeowner is to reflect and ask themselves, as well as anyone else involved in the sale, ‘why’ they want to sell their home. Do they really need to or want to sell?

There are situations where homeowners start the process, perhaps even hiring a real estate agent and placing a sign on the lawn, only to change their minds and halt the sale. Selling a home requires commitment, from the initial decision through to closing. Therefore, it’s essential to fully understand your reasons for selling and ensure that all family members involved are equally committed to the decision.

In addition to identifying the geographic area, type of home, and neighborhood you want to move to, the majority of your preparation time as a homeowner will focus on getting your current home ready for resale.

Connecting with Key Professionals

While we’ve already discussed the physical preparation involved, another time-consuming aspect will be engaging with stakeholders, such as real estate agents, mortgage lenders, and lawyers, and understanding their roles and responsibilities. Asking the right questions and ensuring clear communication with these professionals is crucial to a smooth selling process.

Balancing Selling and Buying

If you’re planning on selling your home, chances are you will also be in the market for purchasing a new home. This means your initial contact will most likely be related to financial readiness and affordability, and aspects related to your next home. These initial stakeholders usually include a mortgage lender and a real estate agent.

Mortgage Lender: Preparing for Your Next Home Purchase

Preparing to Meet with Your Mortgage Lender

Many home sellers are also planning to buy a new property, making it essential to connect with a mortgage lender early in the process.

Before reaching out to a real estate agent or lawyer, most people contact their bank or a mortgage lender to assess whether they qualify for a mortgage and can afford the new home.

In some cases, sellers may contact a real estate agent first, but one of the first questions the agent will ask is about mortgage and financial details, especially if you’re also purchasing a new home.

Documents and Information Required by Your Lender

If you are selling your home and need a mortgage to buy another home, you should be prepared in advance to talk to your mortgage lender. Here are some of the key documents and details your mortgage lender will typically require:

Personal and Employment Information

Up to date identification
Proof of income and employment, including last pay stub. Position and length of employment with your employer
CRA Notice of Assessments, usually last two years
Income Tax Returns, usually for the last two years

Financial and Asset Details

List and details of your assets

Debt and Liabilities Information

Your level of debt (debt/creditor details)
Financial statements from banks and investments
List of debts or financial obligations, including monthly payments, e.g., car loans/leases, credit card balances, lines of credit, student loans, child support

Down Payment and Closing Costs

Details providing the ability to pay closing costs and the down payment
Down payment details and sources

Additional Information

Your mortgage lender may also ask for information related to the home you are about to purchase, including amounts and values associated with that next home purchase.

These are most of the details you should be prepared for when speaking with your mortgage lender. They may request additional information, such as specifics about the property you’re planning to buy and its financial implications.

Real Estate Agent

Setting Home Selling Expectations with Your Real Estate Agent

When selling your home, your real estate agent is expected to provide you with detailed information about market conditions specific to your area. They should also outline their strategy, efforts, and activities to attract the right audience and potential buyers, with the goal of securing the best possible price and offer for your home. This includes marketing plans, pricing strategies, and any other initiatives designed to maximize your home’s visibility and appeal.

Your real estate agent may also provide referrals to other home sale professionals that you will need, including a lawyer, if you don’t already have one. Other professionals may include trade professionals like electricians, plumbers, carpenters, painters or a staging company.

They will also attend and arrange home inspections and appraisals, if your mortgage lender haven’t done so already. Your real estate agent will schedule and arrange open houses, showings for qualified and interested buyers.

Preparing for Key Home Sale Steps

Your Real Estate agent will be providing you with a Real Estate Council of Ontario (RECO) Information Guide which outlines the duties of brokerages and agents, the benefits of working with a realtor, representation agreements, commissions, bidding wars disclosure rules, and other topics.

Essential Documents and Agreements: What you need to prepare for with your home sale real estate agent

When meeting with your real estate agent, you’ll need to have the following prepared:

Identification

You will need to identify yourself when meeting your real estate agent, by law they will need a government form of ID with a picture, such as a driver’s license or a passport. Ask them if they need anything more specific for your meeting.

Listing Agreement

When selling a home, the real estate agent will present you with an agent representation agreement called the ‘Listing Agreement’. This document is a formal contract between the home seller and the real estate brokerage who represents the homeowner after this agreement has been signed.

A real estate agent will ask you to sign a ‘Listing Agreement’, before engaging with you. This document should be straightforward as it gives the listing agent the permission to sell your home for a certain period of time.

Before signing any agreement, you may wish to speak with a lawyer first. You will soon need a real estate lawyer anyways, so this can be one of the first questions you can ask your lawyer, what should you know about a real estate ‘Listing Agreement’
You will soon need a real estate lawyer anyways, so this can be one of the first questions you can ask your lawyer, what should you know about a real estate ‘Listing Agreement’

Setting Your Sale Price and Listing Strategy

Sale Price Considerations

Your real estate agent will want to know how much you want to sell your home for, and why and how you arrived at that amount. Your agent will be able to provide market comparisons to guide you in setting an attractive, yet profitable, listing price.

Home Showings and Open Houses

You will need to create a schedule for home showings and open houses. Make sure you are out of the home during these events, and that the home is clean and typically staged for optimal presentation.

Effective Communication and Negotiation

Offers and Negotiation Process

Be prepared to communicate effectively with your real estate agent to gain a clear understanding of the process for receiving offers, which may include multiple offers. You will also need to discuss your negotiation strategy in partnership with your agent. Your agent will present and thoroughly review the offers with you, ensuring you feel confident and satisfied with your preferred offer.

Clarifying Any Uncertainties

It’s important to ask questions about this process during your initial meetings to clarify any uncertainties and help ensure a smooth transaction.

The Listing Agreement

Understanding the Listing Agreement

Your realtor can expand on the importance and details of these documents during your initial meetings.

Most importantly, whether you’re selling, buying, or both, if you’re uncomfortable with any document or do not fully understand it, refrain from signing until you are confident in its contents and feel comfortable moving forward. You can always ask your lawyer for direction prior.

Although this blog post doesn’t cover every aspect of the real estate selling process, we’ve highlighted essential components based on our client experiences.

Typical selected questions to ask your real estate agent

We’ve provided additional details and similar questions and insights about working with advisors in Section 3 of this guide. Section 3 would be recommended reading when preparing for real estate agent interviews and selecting your real estate agent. These questions may include:

Real Estate Agent Fees and Costs

What are their commission fees? How does that all work? Are there any other fees or charges? (Sometimes the cost of staging may be in addition to the commission fee)

Agent’s Availability and Commitment

How many clients do you have and how much time will you have to focus on my home resale?

Your Role and Expectations

What do they expect of you and your involvement throughout the entire selling, offers and closing process?
What level of response should you expect from them? How soon will they respond to your phone calls, emails, texts and voicemails? Be prepared to respond to the same questions.

Communication and Updates

Ask the real estate agent how they plan to keep you up-to-date and informed throughout the home sale process?

Marketing and Staging

What do they need from you to help market your home?
How will they help stage your home?

Listing Price and Agreement

How will a listing price be calculated? Will the homeowner and seller have the final say in the listing price?
What is involved with the listing agreement? When does it begin and end? You will want time to read it on your own and perhaps the assistance of a lawyer

Home Disclosures and Security

Ask them to help you with home disclosures, what you need to disclose?
Complete strangers will be entering your home, and you can’t hide everything. How do you ensure your belongings are safe and your home remains undamaged?

It may also be prudent to include a lawyer in your initial planning, we will provide more details about real estate lawyer preparation and roles in sections three and in section seven.

Other Home Selling Stakeholders

Key Stakeholders in the Home Selling Process

You may want to conduct some research on working with other key stakeholders in the home sale process, including specialists who focus on:

Home Inspection
Home appraisal
Surveys
Home Insurance

Although this section has primarily focused on Homeowner Preparation, we felt it was important to highlight a few key factors and insights related to your home selling efforts and the key stakeholders involved in the process.

We will go into more detail about working with your advisors in section three of this guide, ‘Section 3. Home Selling Advisors: Working With Your Lawyer and Your Real Estate Agent’. Our first section will focus on initial preparation for you and your home.

There are other important home selling factors, which we will briefly mention in this section, including your mindset and your motivation for selling your home, which will be expanded upon within this guide.

These factors may include:

As mentioned, ‘Why do you want to sell?’ What are your primary motivations?
Is it the right time to sell your home?
Have the home sellers talked to all the home sale process stakeholders, especially your family members? Do your other family members want to move?
Is the motivation to move to a different area or are they financially motivated to sell?

Preparing to Work with Stakeholders

You should be properly prepared prior to meeting with your stakeholders, this preparation should include:

You should be prepared to answer your stakeholder questions, specifically your real estate agent and your lawyer, in addition be prepared to ask questions of your own
Information related to your mortgage and mortgage lender
There will be many stakeholders involved in the selling process, many will ask similar questions, and they will all ask specific questions related to their area of specialization. Most will ask why you are selling your home, which can help them customize their services with your specific needs in mind

Essential Stakeholders in Your Home Selling Process

Your home sale process stakeholders will most likely include a:

Real Estate selling agent, and a real estate ‘buying’ agent if you are also buying a home during the selling process
Mortgage Lender (other mortgage lender/financial representatives, including a mortgage broker, and credit contact and appraisal contacts will follow after the process has been initiated)
Real Estate lawyer
Home Inspection
Insurance broker

Home Sale Price Uncertainty

Understanding Market Value and Your Agent’s Strategy

Be prepared to understand local market values and comparisons in your area. Your agent should be conducting these analyses on your behalf. That being said, it’s essential to do some initial research to familiarize yourself with your agent’s selling strategy and negotiation approach. Additionally, understand how your agent determined the market value of your home. This exercise will prove useful during the negotiation, offer, and counteroffer process.

This first section focused on initial homeowner preparations. The next section will provide insights and factors related to preparing your home physically for resale.

2. Preparing Your Home for Resale

In the previous section, we provided insights on homeowner preparation best practices. The next step is understanding what homeowners can do to best prepare their home for sale.

Home Selling Preparation

Once the homeowner’s sale motivations and needs are understood, the next step is to determine how to best prepare the home for sale.

1. Start Getting Rid of Stuff

Decluttering all areas of your home, including the basement, is essential. A home sale presents the perfect opportunity to rid yourself of unused and low-value personal items. Consider letting go of old toys, stale newspapers, and items with little future use. Now is the time to find new owners for these items or discard them responsibly. Decluttering will make your home significantly more appealing to potential buyers, both online and in-person. A thorough decluttering and deep cleaning can substantially increase your home’s sale value.

2. Home Maintenance

When it comes to preparing your home for sale, it’s essential to understand the tasks that you can handle yourself versus those that require professional expertise. Start a ‘fix it’ list and get started. Contact appropriate licensed trades/specialists such as electricians, plumbers, painters, carpenters, HVAC, etc. Or, ask your realtor if they can recommend a contractor. Fixing minor defects in a home goes hand-in-hand with selling a home. Your realtor may have a robust set of referrals for the right contractor needed to fix whatever issues may be necessary for getting top dollar for your home.

This list may include:

All electrical matters, switches, lights, fans, fixtures all in working order, if not, this is the time for repair
All plumbing matters. Are the toilets, sinks, faucets, showers, bathroom fixtures (shower heads), drains etc. all in working order, if not, this is the time for repair
Have the furnace and AC checked and serviced
Have any damaged or worn areas fixed and painted, including walls/ceilings patched, if damaged, and your house painted, if required

3. Home Maintenance and Repairs Before Selling

Ensure all windows open and cranks are working
Replace lightbulbs
Replace furnace filters
Ensure all appliances are in working order
Prepare a file of major appliances purchases and service record
Prepare a file for major renovations made (appraiser and inspector may want to see these) during ownership

4. Home Inspection and Property Survey Plan

Consider two crucial investments before selling your home to make it more attractive to potential buyers:

Pre-Home Sale Inspection: Identify and address potential issues before listing your property, giving you a competitive edge in the market.
Authentic Survey Plan: A survey plan provides a precise mapping of your property boundaries, reducing the risk of boundary disputes and giving buyers peace of mind. A survey plan is a proactive measure that can prevent boundary issues, making your property more appealing to future buyers.

Here are two sites which may help you with finding a home inspector or land surveyor:

5. Thorough House Cleaning – Deep Cleaning

Consider hiring a professional cleaning service for a thorough deep cleaning of your home. While regular cleaning typically focuses on surface-level tasks such as:

Cleaning floors and countertops
Light dusting
Maintaining overall cleanliness

Deep cleaning goes beyond these tasks to tackle neglected areas and provide a detailed, thorough cleaning, including:

Deep scrubbing and rubdowns
Cleaning in hard-to-reach nooks and crevices
Detailed attention to closets, doors, fans, cabinets, appliances, and baseboards

Due to the extensive nature, focus, and time required, deep cleaning services typically cost more than regular or maintenance cleaning.

6. Strategic Home Renovations or Remodelling

Ask your realtor for guidance and consider investing in home renovations or remodelling to increase your home’s appeal and value. Some buyers prefer a move-in-ready home with minimal work required. Focus on:

Minor Renovations:

Painting with neutral colors
Replacing minor light fixtures
Fixing leaking faucets
Repairing or replacing squeaky or broken ceiling fans and doorknobs

Moderate Remodelling or Repairs:

Removing outdated wallpaper and repainting
Cleaning or painting kitchen cabinets (white is a popular choice)
Refinishing or resurfacing hardwood floors
Cleaning or replacing carpets

These strategic renovations can make your home more attractive to potential buyers and set it apart from the competition.

7. Curb Appeal

First impressions matter when selling your home. The exterior appeal of your property, including the lawn, landscaping, driveway, roof, doors, and windows, can significantly impact potential buyers. Consider hiring professionals to enhance these focus areas before listing your home. This may include:

Lawn Care:

Hiring a professional to give your lawn a boost, including mowing, trimming, and fertilizing

Exterior Renovation Considerations:

Replacing old windows with new energy-efficient ones
Cleaning or repairing eavestroughs, soffits, and fascia
Repairing, replacing, or re-coating the driveway

By investing in these exterior improvements, you can create a positive first impression and increase your home’s curb appeal, making it more attractive to potential buyers.

8. Prepare a Record for Home Investments or Known Issues

Organizing a list, including the issues and fixes including the contractor hired to fix the issue. Include a list of all major appliances, the vendor, the date of purchase and any warranties or service plans.

9. Utilities

As the primary stakeholder who is selling your home, you are responsible for cancelling your utilities. You should also be ‘preparing’ in advance to cancel all your subscriptions (home delivery like newspaper, Amazon for example) and utilities, so when the time comes to cancel them, you will have all the termination information ready. In addition to subscriptions and utilities, other important items to consider cancelling:

Pre-authorized Municipal tax payments
Home insurance (though, we do not recommend cancelling insurance as of the closing date, in case the closing is extended for any reason. Talk to your agent about keeping insurance in place until the closing has successfully been completed)

Surveys – Do I Need a Survey?

The quick answer is no, yes and maybe. Let us expand on that.

No, It is not mandatory by law to have a survey when selling a home.

Yes, if there is seller disclosure about a site boundary issue or dispute, a survey is a good idea.

Maybe, although you don’t legally need one, having one could be very beneficial when selling your home. Some buyers would value the document and would give them the peace of mind that the property is covered from a survey perspective, they don’t have to worry about the property’s boundaries or any future potential issues or disputes. Another benefit is that they wouldn’t have to have a survey performed in the future.

Benefits of Having a Survey

A house survey is performed by a licensed professional. The survey provides a detailed analysis and description of your property, including its boundaries, its structures, and the property’s measurements.

A recent study conducted for the GTA showed that 49% of residential properties had boundary issues that could lead to disputes, so boundary disputes may not be as rare as expected.

If your neighbor builds a structure, builds a fence, pours a concrete pad in their backyard and it encroaches over a property line your survey can help protect you and your property boundaries.

Although Title Insurance ‘may’ alleviate the need for a property survey, if there is a dispute Title Insurance will defer to a property survey. You should also investigate who the Title Insurance covers, does it cover you or the lender, or both?

Additional information about surveys can be found at the Association of Ontario Land Surveyors website.

Next Steps: Working with Your Home Sale Advisors

Now that preparations have been planned by the homeowner for both themselves and their home, the next section will provide insights and details about working with your home sale advisors and resources

3. Home Selling Advisors: Working With Your Lawyer and Real Estate Agent

Key Considerations for Home Sellers

The homeowner will need the assistance of a lawyer and in most cases a real estate agent, a mortgage lender, and perhaps other resources. This section will provide details to best prepare for these advisors and their role with the home sale process.

Real Estate Agent

One of the first things you will want to do is to start looking for an experienced and knowledgeable real estate agent that is a fit for your needs and comfort levels, and also knows your specific home area market and geography. Your questions may include:

Selecting the Right Real Estate Agent

Is the listing agent the person you will be dealing with, or will they be delegating the sale to one of their assistants? You may want to meet with the agent you will actually be doing all the work for you.
Ask the real estate agent why you should hire them.
Can they provide references for homes they sold, also homes sold in your neighborhood? Ask them how the agent assisted them throughout the home sale process, and how they worked with the homeowner during the negotiation process.
How many homes have they sold recently and, in the past, the agent specifically and their broker office as a whole?
How many were as a seller agent and how many as a buyer agent? What have been their results and sale outcomes?

Communication and Availability

Ask them how frequently and how they will be communicating with you throughout the process? Will they communicate via phone/voicemail, text, email etc.? Do you have their direct mobile phone number?
What do they believe your house is worth and why? What does the market actually value your home’s worth and resale?
Are they a full-time broker or do they have another job?

Marketing and Staging Your Home

What is their specific approach to marketing my home? How will they drive the ‘right audience and buyer’ activity to your specific listing and open houses for your home? What online activity?
What imagery will they be using? Still images, video, drone images etc.? They should have specific details about the marketing process.
What is their staging process and what involvement do they need from the seller?

Open Houses and Negotiation

What is their approach for open house? Frequency, hours required for each open house and duration.
What is their negotiation approach, and response to underbidding? Do they know your comfort areas for home sale price reduction during negotiation?

Fees

Are there any fees that you should be aware of, aside from the realtor brokerage fees
What do they believe you need to do to prepare your home for resale? What repairs or renovations? Ask them if there are any other factors or questions you haven’t asked of them or that you may have missed

Recommendations for Repairs and Renovations

In the event you need repairs or renovations, you may want to ask the realtor if they have recommendations for skilled trades for the repairs and renovations. They may also know contacts for home inspectors, plumbers, electricians, painters, contractors, stagers etc.

Finding the Right Fit

Ask for referrals from people you know and trust and have numerous interviews (at least 3) to find the right fit. Don’t be afraid to interview these prospective real estate agents before making any commitments. Don’t forget to check out their online reviews as well.

Your real estate agent will ask you many questions, these questions may include:

The responsibilities of the home seller
Understanding contract and legal documents
Being calm during the home sale process. The pressure of selling quickly, if financially constrained
What about house insurance? How does that work?
Most common mistakes made by home sellers

Real Estate Lawyer

The Role of Your Real Estate Lawyer

Whether you are buying or selling a home, having a lawyer is required, particularly for the ‘transfer of title,’ which is a legal component of the completing the sale.

Your real estate lawyer will assist you throughout the selling and buying process. This process can sometimes become quite complex.

They will also ensure that the transfer of homeownership is legally binding and complies with all applicable laws.

Importance of Early Involvement

Your real estate lawyer plays a critical role in the home selling process, so it’s important to involve them as early as possible.

Choosing the Right Lawyer

It’s crucial that your lawyer is a knowledgeable and competent legal specialist in handling home sale and real estate transactions.

You’ll want a friendly, thorough, and detail-oriented lawyer, along with a client-focused office staff, to guide you smoothly through the entire process.

Consulting Your Lawyer on Home Selling Agreements

As mentioned earlier, when you first meet with your real estate agent, they will ask you to sign a “Listing Agreement.” Before signing any agreement, it’s advisable to consult a lawyer. Since a real estate lawyer is essential throughout the home selling process, one of the first questions you can ask them is, “What is a listing agreement, and should I consult a lawyer before signing one?”

What You Will Need to Provide to Your Lawyer

You will need to provide to your lawyer proper identification, including two pieces of ID, one being a government issued ID with photo (excluding a health card). You will also need to provide all the documents related to your property, including your:

The real estate contract, the Real Estate Agreement of Purchase and Sale
Mortgage/line of credit details, including a document with your Mortgage Reference Number
Most recent property tax bill
Copy of a survey, if you have one

Your lawyer will require a copy of the Agreement of Purchase and Sale, and your ID, in order to formally open a file.

Once you are prepared to meet with your trusted resources, it’s time to focus on the strategic and tactical components of the home sale process, including understanding how to receive and negotiate offers on your home, which we will cover in the next section.

4. Home Selling: Understanding the Process of Receiving and Negotiating Offers

Understanding the Home Selling Process

The home selling process will have many tactics and strategies related to the selling of your home, and the eventual receiving of offers. This section will help with the understanding of the process.

Receiving home purchase offers and the negotiation process can seem overwhelming and a bit intimidating, especially if you are not accustomed to signing contracts on a regular basis. It may appear that way, but it doesn’t have to be, not when you have competent resources working with you, including your real estate agent and broker, your real estate lawyer, your mortgage lender along with all their staff who are there to support them with your home sale efforts.

Navigating Home Selling Counteroffers: Receiving Offers and the Role of Your Team

When your home has been listed, your real estate agent will begin scheduling home visits for other brokers and their clients and hosting open houses. Eventually your agent will begin to receive offers, and sometimes multiple offers all at once. One of the first steps when receiving an offer is to examine and evaluate the offer very carefully. Evaluation criteria should include:

Offer price
The buyers financial standing and financial qualifications
The proposed closing date
Conditions placed on the home, if any

When you receive an offer, it’s unlikely that you will accept it ‘as is’. You will most likely either be declining the offer or making a ‘counteroffer’. If you decline the buyer’s offer, they can make another offer or they can simply walk away from the process.

Navigating Counteroffers

The counteroffer is a natural and normal part of the negotiation process and something that your real estate agent should be very familiar and comfortable with. Your counteroffer may include an adjustment to the offer price they presented, or it may concern the conditions set forth in the offer, conditions that you may be uncomfortable with. It’s important to be very specific and clear with your counteroffer to avoid any potential misunderstandings.

Understanding Irrevocable Dates

A common misconception is that a counteroffer must be submitted by the noted “irrevocable” date on the initial offer. This is incorrect. The irrevocable date on an offer is the timeline by which you have to accept the initial offer, without any changes or amendments made to it. If you plan on amending the offer and submitting a counteroffer, the irrevocable date becomes irrelevant, as you are no longer accepting the original offer. At the time you submit a counteroffer, you will pick a new irrevocable date for your offer.

Home Selling: Chattels and Fixtures – What Can We Keep and Take with Us, and What Do We Need to Leave Behind?

First, let’s define the difference between a fixture and a chattel. A fixture is part of the building, its fixed or fastened to the building, and it’s built into the building and cannot be moved. A Chattel is an item of personal property that is movable and is not part of the building.

Ontario real estate law states that at first instance, fixtures are included, and chattels are not.

Examples of Chattels

Artwork
Floor coverings, like area rugs
Furniture
Curtains and blinds
Appliances (fridge, stove, dishwasher, washer/dryer)

Examples of Fixtures

Doors
Furnaces and central air conditioners
Bathroom fixtures
Installed broadloom and carpets

Avoiding Disputes in Sale Agreements

Avoid disputes and make sure the wording and context are very clear in the sale agreement, if an item needs to be excluded then it should be specified and named in the sales agreement.

What About Deposits?

Ways a Deposit Can Be Made

The deposit is submitted along with the offer.
The deposit is submitted within 24 hours of the acceptance of the offer.
A deposit arrangement has been made and the details have been included in the Agreement of Purchase and Sale.

In most cases, the deposit is held in a trust account with the ‘listing’ agent.

Importance of the Buyer’s Deposit

A buyer’s deposit funds need to be available, especially if they may want a competitive edge with their offer. If an offer has been made on your home with conditions and the conditions have not been withdrawn by the buyer, then the buyer’s deposit will be returned to them in its entirety.

What Happens if Conditions Aren’t Met?

However, should the seller have reason to believe that the buyer did not act in ‘good faith’, then the deposit can be put ‘on hold’ until a judge rules on the deposit, which could take some time to resolve.

What Are Real Estate Lowball Offers?

Lowball offers are usually offers that are below the home’s market price or below the asking price.

The motivation behind a ‘lowball’ offer is somewhat obvious; the buyer wants to buy the home at a discount.

The Buyer Benefits of a Lowball Offer May Include:

Potential for significant savings, if a seller is motivated to sell, or desperate
Negotiation tactic to open discussions, trigger counteroffers. The buyer is looking for leverage

Potential Reasons Why Buyers May Lowball

The buyers themselves have a maximum budget, but they really like and want the home
The buyer has different home preference and tastes and feels that the home will need remodeling and renovations and have deducted the price of the remodelling and renovations from the asking price
Buyer agent inexperience, they may not have properly valued or assessed local market conditions, the property’s history and comparable sales for the area
Buyers may have other reasons why they believe your house may be less than your asking price

The Disadvantages of a Lowball Offer

Negative perception of buyer by the seller and seller’s agent
Wasted time, frustration and effort for the seller and listing agent, and perhaps disappointment for the potential buyer themselves
It’s an ineffective strategy in a hot market or a home in high demand, where other buyers are paying the asking price or more
The buyer may be very disappointed if they really wanted that home, and their agent suggested a lowball when the buyer wanted to offer the asking price

Approaches to Counter Lowball Offers

Don’t take it personally. Trust your real estate agent if they advise you to entertain the lowball offer negotiation process
Reevaluate your asking price. Have ‘you and your agent’ assessed local market conditions, the property’s history and comparable sales for the area?
Respond to the lowball offer with a realistic counteroffer price
If your counteroffer was rejected again by the lowball agent, perhaps it’s best to just ‘walk away’ from the process

Home Selling: Inspection and Repairs

Many homeowners who are selling their home understand that a home inspection will probably be needed if they want to sell their home. This may cause some concern and anxiety, what if costly repairs will be required?

The Importance of Home Inspections

A licensed home inspector should be doing a very thorough inspection of your home. From the roof, throughout the home and down to the basement. The inspector will be looking for structural issues like faulty wiring, plumbing issues and other issues like hidden water damage.

Impact on Negotiations

If the inspection is performed during a home sale offer process, it could affect the negotiations with the seller making concessions, or worse the buyer walking away from the deal altogether.

So much so that a home seller may become even more concerned with the home inspection. It doesn’t have to be. These repairs may have been necessary regardless of selling your home, and the inspections could be saving the homeowner money if the issues were diagnosed early.

Proactive Inspections: A Smart Strategy

You may want to consider getting a home inspection yourself, prior to listing the property for sale. If a home inspection was performed proactively before the home was listed, this could be an opportunity to resolve any inspection issues before the listing and offer processes have been initiated. A healthy home and clean inspection report could demonstrate transparency and trust with future potential buyers.

A home inspection helps both the buyers and sellers make informed and transparent decisions, and limit and the future home inspection issues or misunderstandings.

What Are The Disclosure Obligations of a Home Seller?

The starting presumption of any purchase is ‘Caveat Emptor’, meaning: “Buyer beware”. It is up to the buyer to identify any deficiencies with the property that they want resolved, prior to closing. Deficiencies that are readily observable are referred to as “Patent Defects”. If the buyer does not address Patent Defects through the negotiations of the purchase, the buyer is presumed to have accepted such deficiency.

Understanding Patent and Latent Defects

On the other hand, the Seller is obligated to disclose any “Latent Defects”. Those are any defects that are not readily observable, such as hidden issues behind a wall, ceiling or floor, which the Seller has knowledge of. The Seller’s failure to disclose Latent Defects can lead to misrepresentation and breach of contract.

Importance of Full Disclosure

To ensure you as a Seller don’t run into any issues, full disclosure is highly recommended. So much so that the Ontario Real Estate association (OREA) has published a ‘Seller Property Information Sheet (SIPS)’ which requests details and information about the condition of the home that is for sale. The SIPS does state that the answers are not warranties or and are for informational purposes. The SIPS also states that sellers are not responsible for accuracy of their answers.

This is a document that you may be requested to complete by your real estate agent, and failure to provide the SIPS report may cause potential buyers to believe that there may be an issue with the property.

Another reason to have an inspection performed beforehand.

Legal Considerations and Responsibilities

The SIPS may be another document that you may want to review by a lawyer, it is written in a somewhat complex legal tone. Real estate agents are not lawyers, and there may be questions within the SIPS that require complex answers and answers required within the SIPS that are not required under law.

Examples of Latent Defects that should be disclosed:

Plumbing damages
Leaking foundation
Electrical issues
Roof issues
Mould and mildew

What Happens if You Don’t Disclose?

You may have to pay for repairs
You may have to pay for legal expenses
You may have to pay for the cost of lost property value

What Are Home Stigmas?

A stigma when referred to a home sale or purchase (real estate); “In the context of real estate, a ‘stigma’ is a non-physical, intangible attribute of a property that may elicit a psychological or emotional response on the part of a potential buyer.” (“Buying or selling a former grow-op home? – Ottawa Sun”) , Real Estate Council of Ontario (RECO).

Examples of Home Stigmas

Property Was Used During or for a Crime (e.g. Drug Dealing)

A death occurred on the property
Property was owned by “notorious individual” (crime leader or known murderer)
Property was used for marijuana grow operation

Truthful Disclosure of Stigmas

If the buyer specifically asks about a stigma, you must answer truthfully. For example, if the buyer/buyer agent asks if you have issues with any neighbors, if they are loud or known to cause trouble, you must answer honesty.

Privacy Rights and Personal Questions

You still have your rights to privacy. If the buyer agent were to ask you a question in the context of stigma, but is a question that is personal or private, such as personal illness, marriage issues, that is a personal question and not related to stigma.

Navigating the Selling Process

Many of the questions we receive are related to the process of receiving and negotiating offers. We trust we have provided some insights to help the home seller navigate these two important components.

Looking Ahead: Checklists for Home Sellers

Our next section covers one of the most popular requests we receive: checklists. Our clients often ask for a list of ‘to-do’s when completing a specific task. We hope this section assists you in your home-selling journey.

5. Home Selling Checklists: What Do I Do Next

Our clients often ask us to include a task list of fundamentals, a ‘to-do’ list, for the topics we are writing about. A checklist for selling your home sale can be beneficial because it allows us to break a somewhat complex set of tasks into a more manageable series of steps and also track the items on the list which we have completed.

The Importance of a Home Selling Checklist

A checklist can also provide additional insights and steps a reader may not have thought of, and also remind us about a step, and it may also limit missing or forgetting something important.

There are many categories and subcategories that could have been included in this section, which could be a bit overwhelming, so we have taken a practical approach and included the tasks that most home sellers may need to track or be aware of.

Things To Do Before Listing Your Home

We’ve included several series of checklists throughout this guide to help you with your home sale process. It may be beneficial to be proactive and create a home sale timeline. A timeline with all points in the home sale process, from the beginning to the end. This timeline will help you with making sure the entire process goes as smoothly as possible, and you don’t miss important milestones or waste your time with forgotten items. You may want to update your timeline with new items (or check off completed items) as the home sale process matures.

Gather Important Documents

You will need these documents when meeting with your home sale stakeholders, including your mortgage specialist, real estate agent and lawyer. Some of these documents are for the next owner of the home (warranties, manual, contact information for service professionals):

Income and employment details (T4, CRA Notice of Assessments, Pay stubs etc.)
Deed to your home
Home appraisals
Surveys performed
Property tax statements or receipts
Extended warranties, list of contractors or services for your home
Receipts or invoices related to home improvements
Insurance details
Copies of manuals for all appliances, AC, furnace, pool equipment etc. and contact information for the service professionals or contractors who worked on your home. If you have a pool, details related to pool equipment, water tests etc., pool company contact)
Mortgage or Line of Credit Statements for any outstanding loans registered against the property

Be Prepared To Answer Home Selling Questions From Your Real Estate Agent Related To:

When was your house built? If the previous owner provided you with those details
Is your home’s electrical and wiring in working order? Any details related to any quirks or issues. Details related to the wiring updates, panel capacity(e.g. 200 amp). Location of panel, hidden switches etc.?
Is your home’s plumbing and drainage in working order? Details of any issues, floods etc.? Are there any issues with the foundation?
Home air filter details. Extra filter and sources for filters?
Dates of major appliance replacements and installation, e.g. furnace, air conditioner, pool equipment etc.?
Is the home equipped with water softener?
Any issues or problems related to mildew or mould?

Typical Checklist Items in Advance of Closing Day

Carefully review and understand all fees and structures before signing. This includes real estate fees and commissions, lawyer fees, mortgage structure and interest charges etc., fees related to title insurance, and if needed surveys and inspections fees
Be prepared for buyer visits before closing, the buyer is entitled to visit the home in advance of closing, usually two or three visits. These visits should be outlined in ‘Schedule A’ of the Agreement of Purchase and Sale. Visits usually last about an hour and require 24 hours’ notice
You should be in contact with a moving company early in the process
Purchase moving materials
If you are taking your fridge or freezer, plan for your food
All moving and packing materials purchased
Your lawyer will need the keys to the home, some if you have multiple sets, start tracking who has them and dates to have them returned to you. You will need to remove the locks/codes from your apps if you have remote access to door locks etc.
If you have a garage door opener, leave the fobs and or remote-control units on the kitchen counter of your house, same for spare keys
Make sure you have all the documents in order for your stakeholders, your mortgage specialist, your real estate agent and lawyer

Repairs

Are there any minor or major repairs that need to be completed to the exterior or the interior of the home?
Look for damaged or worn areas throughout the home, including walls, doors, windows and baseboards. Holes (pins, hanging pictures etc.) in areas, walls etc.
Reconsider paint color schemes if not neutral tones
Reconsider wallpaper, consider repainting
Front and backyards organized, clean and tidy
If it’s summer, has the lawn been mowed? Any gardens weeded out and tended to?
If its winter has the driveway and walkways been cleared? De-iced and safe to walk on?

Making Your Home Less Personal for Your Buyer

Have you removed all personal items, family pictures, unnecessary furniture, or other personal items
Most collections of books, music, sports memorabilia etc. should be stored off-site both for decluttering and ensuring your home looks less personal for your potential buyers, and for security reasons
Has the kitchen been decluttered, including all cupboards, counters and floors? Have the sinks been cleaned? No offensive odors? Has the stove been cleaned?
Offensive
All items that could be considered offensive should be removed from your home
Has the home been decluttered? Don’t forget your basement, garage or storage areas.
Has the home been ‘deep cleaned’? Floors washed and vacuumed?
Children’s items like toys etc. should be put in storage in your home or neatly organized and set aside
Non-essentials or personal items should be stored away from your home. Have you considered or rented a storage locker or pod? To remove any unnecessary belonging or personal items. Consider storage for boxes, containers, unused items or equipment. Remove as much clutter as possible to allow the buyers to see a decluttered home and open spaces
Has all excess furniture been removed from all rooms, including the living room, den, hallways, bedrooms?
Have the windows been cleaned, clear to view exterior and are able to let in the sun?

Home Selling: Closing Day To-Do’s

Communicate with your lawyer proactively over the last couple weeks before closing, especially the last week before closing.
Ensure your lawyer has all the information and documentation needed for closing, including the deed, mortgage and loan payoff details, and current property tax bills. If an inspection was performed and repairs required, provide the repair information and those details to your lawyer. Be responsive to your lawyer’s calls and be on time when they need you to provide information or sign documents
Have all utilities been scheduled for cancellation?
Have all subscription and home delivery been rescheduled, or address changed (newspaper, Amazon etc.)?
Contact your doctor, dentist and other professionals about your move
Contact Canada Post about your move and address change
If moving outside of your area, don’t forget to contact your kids’ school and new school if required
Has the home insurance been scheduled for cancellation? Ask your insurance agent about when to schedule the insurance cancellation if the closing date changes or there are problems with closing. You don’t want your insurance to end when you are still in the home
Contact all of your banks, credit cards, utilities, cable, internet, government ID (drivers license, health card) etc. about your address change
Ensure your movers are on schedule
Is there any last-minute cleaning required for the home you are selling?
If you are a non-resident of Canada, you will need to have a certificate from Canada Revenue Agency (CRA) that you’ve paid the applicable taxes, your lawyer will advise you about those taxes
Do a final walk through of the home, including basement, closets, cupboards, dishwasher, fridge, stove etc.

Although it would be difficult to itemize every single detail that could arise during the home-selling process, we hope our checklists provide valuable guidance for your home-selling preparation.

Our next section will try to provide insights on one of the final steps in the process of selling your home, and perhaps one of the most important: the day of closing and what to expect on that day.

6. Home Closing: What To Expect

Our focus on our sixth section will be on the many questions we receive about the latter stage of the home sale process on the day of closing.

Common Questions on Closing Day

These Questions Include

What should I expect on closing day?
What happens on the day of closing?
What do I do with my keys?
Do I need a survey?
Who contacts the utility companies?
Who contacts the property tax department?
How is my mortgage dealt with?
When can I expect my money?
What happens if the buyer can’t close?

For your information and convenience, we’ve outlined the answers within this section and throughout this guide.

Understanding Your Documents and Paperwork

There are many documents and paperwork involved with buying or selling a home in Ontario.

The Ontario Real Estate Association (OREA) has developed a set of standardized forms that are most commonly use for the resale of residential or commercial property. These forms are generally very good and complete, but they deal with a lot of issues and can be complex.

Most agreements to buy and sell real estate are created on pre-printed forms which have been created by the real estate industry or by lawyers.

Importance of Reviewing Your Agreement of Purchase and Sale

Understanding your obligations and entitlements of your Agreement of Purchase and Sale before you sign it can avoid disputes and lower your costs. Having your lawyer review the Agreement of Purchase and Sale with you before you sign it can ensure that understanding.

Essential Documents Involved in the Sale. These documents may include

The Real Estate Council of Ontario (RECO) Information Guide
Listing Agreement – Authority to Offer for Sale
Ontario Real Estate association (OREA) ‘Seller Property Information Sheet (SIPS)’
Agreement of Purchase and Sale
Agreement of Purchase and Sale Condominium
Buyer Representation Agreement
Buyer Customer Service Agreement
Confirmation of Cooperation and Representation
Seller Customer Service Agreement

The Sales Agreement Process

Understanding the Agreement of Purchase and Sale

Not sure how the home purchase process works? The primary document at this point would be the Agreement of Purchase and Sale (Agreement). Every home purchase is different; however, this is a typical home purchase sale process:

The home buyer will have their real estate representative assisting them with the finding, locating, and selecting the home they wish to purchase. They will also be involved in negotiating the home purchase.
The Buyer’s agent will prepare an offer to purchase and submit it to the Seller or his or her representative.
Once both parties have executed the Agreement, the signed agreement is then sent to a lawyer who is requested to complete the purchase.
Once signed by both parties, an agreement of purchase and sale cannot be amended without the consent of all parties.
Once the Agreement is signed, the final closing processes begin. All legal documents must be signed, and all payments must be paid out. In most cases, once all the closing details and transactions are completed, you will receive the keys to your first home before the end of the closing day. However, there could be factors that impact whether you get your keys at the end of closing day, these factors include mortgage funding, courier delivery of keys, online registrations completed.

Don’t forget to bring your identification when you are signing documents with your lawyer. They usually need to make two copies of your ID. One must be photo ID (not Health card), your passport can be your other ID.

Closing Day – Final Processes and Activities

Closing day activities will be very active on or just before closing day.

Step One: Receiving Mortgage Funds

Usually, on the morning of closing day the buyer’s lawyer will receive the mortgage funds from the mortgage lender. The buyer’s lawyer will usually electronically transfer the designated funds to seller’s lawyer trust account or deliver a bank draft.

A checklist and calendar representing the organization and planning of important tasks for a successful closing day in the home selling process. — .

Step Two: Verifying Closing Documents

The seller’s lawyer will then verify and validate that the closing documents are complete, ensuring all documents are accurate and properly signed, and ensure that any conditions have been fulfilled as per the sales agreement.

Step Three: Registering the Property

Once both buyer’s lawyer and the seller’s lawyer have confirmed that everything is accurate, correct and all in place, then the next steps are to register the property, transfer ownership to the buyer making any required security registration for the lender.

Once step three is completed, the seller’s lawyer will transfer the funds to agreed-upon seller’s account (if there was no mortgage outstanding to pay out), usually the same or next day after closing.

Home Selling: What Could Go Wrong

Things happen. There could be extenuating circumstances on the buyer’s end that could delay the process, these could be circumstances that are out of the buyer’s control.

Understanding the Risks of Closing

Legally, if the buyer doesn’t close the deal on the agreed upon date, the seller can decide to terminate the deal, and the buyer could lose their deposit. In most cases it’s in both the buyer’s and seller’s interest to make the deal work and come to an amenable arrangement for both sides.

Surprise Costs and Misunderstandings

Other things that can go awry are surprise costs because the buyer didn’t do their homework, or their lawyer or real estate agent didn’t realize the buyer didn’t understand all the fees.

An example of these surprise costs is the land transfer tax, or the disbursement fees (usually 3^rd party fees) charged by their lawyer while working on the client’s behalf, in most cases lawyers are not permitted to profit from disbursement fees.

Preventive Measures for a Smooth Process

As outlined in our checklists, there are things the seller or buyer can do to help prevent these issues, such as:

Do your research and homework well in advance. Be prepared and ask lots of questions throughout the process. Make sure you understand the process
Know where all your documents are, get your paperwork in order and complete in advance of when they will be needed
Get your stakeholders involved early in the process (mortgage lender, real estate agent, lawyer etc.)
If you are buying, visit the property in advance of the closing day. Ensure you have those visits agreed upon in the sale agreement
Read all documents thoroughly and understand them

Closing day can be a very exciting part of the home-selling journey, perhaps marking the beginning of the next steps in your homeownership path. We’ve come a long way with this guide, and we appreciate you sticking with us.

Looking Ahead: The Role of a Lawyer

Our next and final section will cover the role of a lawyer in the home selling process. A lawyer provides a very important role by ensuring the legal aspects of the home sale transaction are properly managed.

7. The Role of a Lawyer with the Home Sale

Your real estate lawyer will be fulfilling a critical role with your home sale, so your real estate lawyer should be involved as early as possible.

It’s imperative that your lawyer be a knowledgeable and competent legal specialist when it comes to helping you with your first-home purchase transaction. You will need a friendly, thorough, and detail-oriented lawyer and office staff who are client service oriented who will help you navigate

through the entire process.

Role Summary

A lawyer’s role is to ensure that the home seller is legally and financially protected throughout the home selling process. Your lawyer will be performing and assisting with many tasks throughout the home sale process including:

Title Search and Transfer.Essentiality making sure there are no legals issues, claims, liens, with your property
Financial Transactions Management. Management and administration related to all home sale funds transfer. Receiving payments and ensuring the seller receives payment and all outstanding amounts are paid out, including legal fees and real estate commissions
Agreement of Purchase and Sale Review (see below). Review of this contract ensuring all terms and conditions comply with the sellers’ interests and all legal requirements
Legal Compliance. Ensure all real estate regulations complied with, and liens and taxes are paid
Discharge of the Mortgage. Your lawyer will ensure that your mortgage is properly discharged and paid off upon the sale of your home
Closing Documents Concluded. Preparation and closing of all related home sale documents, including statement of adjustments, financial details including taxes, utilities payments, and the home sale proceeds
Closing Day Activities. All documents are finalized, and the home title is transferred in a thorough and seamless manner.

Home Selling: Some specific areas of interest include:

Agreement of Purchase and Sale

The Role of Your Real Estate Lawyer Will Include Specific Details, Including:

Initial introductions, including understanding your needs
Ensuring that any mortgages or lines of credit registered against the home’s property title are discharged and paid-out
Property fees collections, down payments, taxes, and disbursements paid out related to the property purchase or sale
If a private sale, provide transaction advice, negotiation of terms, preparing a sale or purchase agreement
Preparation of closing documents

Additional Services Your Lawyer Will Provide

Let you know about your closing costs in advance
Also process the mortgage funds from your lender
Deposit those funds in a trust while the deal closes
Discuss any other closing costs with you, including their fees and disbursements, and applicable title insurance

Recent Questions

A couple recent questions we have received have been risks related to the selling a home privately, and the reporting of the home’s sale to the CRA. We will try and provide some insights on those two recent questions.

Understanding Risks and Rewards of Selling a Home Privately

As home values increase as do the fees home sellers will have to pay real estate brokers. These increased fees have caused some home sellers to question the value of having a real estate agent sell their home.

Our clients occasionally ask us whether the risk of selling a home privately is worth it. While we can’t decide for our clients, every home seller’s risk tolerance and needs are different. We can provide some insights into the risks and possible rewards, including:

Potential Benefits and Rewards

Avoiding commission fees, which can lead to significant savings
No sales pressure from a real estate agent, or possibles biases which are not in the seller’s best interest
Control of the home sale process, including price setting, showings schedule, and home sale price negotiation
Negotiate directly with buyers
Seller can personalize marketing to fit their needs and comfort level

Possible Risks and Liability

Compliance with paperwork and regulations. Additional fees may be charges by other stakeholders due to lack of seller skills, knowledge or experience. Inexperience may take additional time and slow down the selling process.
Liability (regulatory and legal) related to errors or omitted articles/information, which could lead to significant financial exposure during the process, or after the sale. The real estate sale transaction is complex and involves contractual details and documentation which must be responsive,timely, thorough, complete and accurate.
The increased amount of time and effort related to selling your home.
Limited access to the wider audience and network resources (listings, staff, knowledge resources etc.), compared to a real estate brokerage. This lack of a broader audience may delay the selling of your home.
Over-pricing or under-pricing the value of your home, due to market value limited resources
Qualifying and weeding out questionable or uncommitted buyers who may or may not fit your profile, or buyers who may not be transparent about their integrity, honesty or credit worthiness.
Buying agents may neglect showing your home to potential buyers.
Lack of experience with negotiation tactics, low-ball offers, which may waste valuable process time.
Buyers may expect a lower price on your home if they know you are selling privately, this may limit the concept of saving on the real estate commission fee.

Final Thoughts

Only the home seller can decide whether the risk is worth the reward.

Considerations for Selling Privately

While the potential savings on brokerage fees may seem significant at first, the amount of effort required by the seller, combined with the legal and contractual responsibilities, can make a private sale challenging. There’s also the risk of incurring legal fees after the sale if issues arise. Given the complexity of the home-selling process, only those who have ample time, and are highly comfortable and experienced with real estate transactions, should consider selling a home privately.

Reporting the Home Sale to Canada Revenue Agency (CRA)

On October 3rd, 2016, the Canadian Government announced a change to the reporting requirements regarding the sale of a principal residence.

Understanding Principal Residence Exemption

If you qualify for the full principal residence exemption, it’s usually not necessary to report the sale of your principal residence on your income tax return, or pay any tax on the profit from it, if you sell it, or are considered to have sold it. That being said, that all changed on October 3^rd, 2016.

Beginning with the 2016 tax year (typically due by late April 2017), you are required to report basic details on your income tax and benefit return when selling your principal residence to claim the full principal residence exemption. This includes the date of acquisition, proceeds of disposition, and a description of the property. Your accountant or bookkeeper can assist you those reporting details.

Additional Home Sale Price Tracking

Role of Your Real Estate Lawyer in Reporting

In addition, at the time of your home sale, your real estate lawyer who is handling your home sale transaction submits a home sale tracking form to the CRA which outlines the details about the sale of your home, including the home sale price.

CRA Data Tracking and Compliance

In most cases, the provincial land title office also provides property transfer information to the CRA. This reporting allows the CRA to cross reference

reported home sales across a few different sources for their records. Compliance data reported from mortgage lenders and real estate agents also update home sale records at CRA, so it critical to accurately report your home sale information on your income tax return.

8. Next Steps

Congratulations on reaching the end of this guide! We hope you found it informative and valuable in your home-selling journey.

Understanding the Home Selling Process

Selling a home can often be a complex undertaking that involves careful research, strategic planning, and an understanding of the local market and the needs of potential buyers.

If you’re considering downsizing or moving to a smaller home, be sure to check out our article, Downsizing: The Advantages and Disadvantages of Moving to a Smaller Home, to learn more about what to consider before making that decision.

The Value of Professional Support

While some sellers might explore the option of selling their home on their own to save on brokerage fees, working with experienced professionals, such as real estate agents and lawyers, can provide valuable advice, insights, and support throughout the process.

If you’re in the market for a new home, take a look at our guide, Six Critical Factors to Consider Before Buying Your Next Home, for important advice before you start your search.

Preparing for Success

By following the steps and checklists outlined in this guide, you may find yourself better prepared with essential information that can assist in approaching the selling process with confidence. From understanding disclosure obligations to managing closing day activities, each aspect plays a role in contributing to a smoother transaction.

Once you’ve successfully sold your home, you might find yourself thinking about purchasing again—especially if it’s been a while. Navigating the buying process can feel different from when you last bought, so we’ve put together some valuable reminders and insights. Check out our blog on You’ve Decided to Buy: 9 Insights to Help the First-Time Home Buyer for helpful tips to guide you through this important next step.

Wishing You Success

Thank you for including us with your home-selling journey research. We wish you success as you take these important steps toward the next chapter of your life!

Sources and Additional Information

Disclaimer

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Canadian Mortgages Inc., ‘What Happens to Current Mortgage When Selling a House in Toronto.

RBC, ‘ Selling and Buying a Home’

RE/MAX, ‘ Selling Your Home Before Your Mortgage Term Ends

ZOLO, ‘ Can You Sell a House With a Mortgage? ‘

Government of Canada, ‘Breaking Your Mortgage Contract’

RE/MAX, ‘Selling Your Home Before Your Mortgage Term Ends’

Rocket Mortgage, ‘What Parties Are Involved When Buying a House?’

MPAC, Municipal Property Assessment Corporation, ‘ Application for Direction of School Support / Separate School Support Lease ‘

Royal LePage, ‘ Sold Your Home? Don’t Forget These 4 Important Steps Before You Leave

City of Toronto, ‘Selling Your Property or Moving – Request a Final Meter Read’, ‘Selling Your Property’ Still Receiving Bills?’ , ‘ Selling Your Property- Finalizing and Setting Up Payments’

Edmonton Real Estate, ‘ What Do You Do With the Utilities When Selling Your Home?’

Homelight, ‘ When Should You Stop Utilities When Selling a House?

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WOWA, ‘Property Survey in Canada; What You Should Know

IBW Surveyors, ‘Surveying Services for Home Owners; Surveyor’s Real Property Report (SRPR)

Protect Your Boundaries, ‘ Why a Survey Plan Should Be in Your Home Selling Package

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A ssociation of Ontario Land Surveyors, ‘ I’m Selling/Buying a House, and the Purchase/Mortgage Lender Says I Need a Survey. How Do I Go About That?

Association of Ontario Land Surveyors, ‘ Find a Survey Company

Ottawa Sun, ‘ Four Closing Day Questions Answered

Sun Life, ‘ Buying a House: What Happens After Your Offer Is Accepted?

Emily Jones Real Estate, ‘ Real Estate Closing: How Long Does It Take?

Wahi , ‘ How Long After Closing Does the Seller Get Paid?

BrelTeam, ‘17 Things To Know About Closing Your House Deal

ZOLO, ‘ What To Expect From a Real Estate Closing: A Seller’s Perspective

CMHC, ‘Closing and Moving Day

Surex,’ What Are the Costs When Selling a House in Ontario?

Royal Lepage, ‘Sold Your Home? Don’t Forget These 4 Important Steps Before You Leave’

CREA, ‘CREA Forecasts Rebound in Residential Property Sales’

WOWA, ‘Canadian Housing Market Data for April 2024’

RBC, ‘Early Signs of a Housing Market Upturn Emerge Across Canada’

Zoocasa, ‘Buyer’s Journey: Here’s What To Expect on Closing Day

RBC, ‘Canada’s Housing Market Outlook: A Tale of Two Halves in 2024

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The Globe and Mail, ‘Seller beware: Even if the deal dies, the agent may still want their commission

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Downsizing: The Advantages and Disadvantages of Moving to a Smaller Home

Posted on January 10, 2024

Introduction

There are many ‘downsizing’ and related topics that we will be addressing in this blog post, some topics in greater detail than the others. We will endeavor to provide a balanced article for your reading pleasure.

Where Are You Today?

The thought of moving to a smaller home has been top of mind for many homeowners who are approaching retirement. Perhaps your retirement is on the immediate horizon, or not for many years. That being said, your children may have all moved out and the house has become just a bit too much for you to maintain and possibly afford.

There could be other reasons for wanting a smaller home. You may have financial or marital issues. Other reasons may include health issues, accessibility and safety, and the risk of falling down a flight of stairs may be another reason, if you live in a two-storey home.

Your reasons may also be related to just wanting a smaller home, with less clutter, or just a change of lifestyle, scenery or a fresh start in a new neighborhood or location.

Article Insights

This post will provide some insights about why people want to downsize and will also include the advantages and disadvantages of downsizing, along with the benefits of moving to a smaller home.

Initially, the thought of downsizing your home may feel both exciting and overwhelming all at once. However, with careful preparation and planning, the move to a smaller home and a more minimalist lifestyle can have a very positive impact on both your lifestyle and your finances.

Planning and Research

One of the most critical factors of downsizing is to start your downsizing planning and research as early as possible, do your ‘homework’. This ‘early start’ includes, your future home and lifestyle research, desired geographical location (real estate values), along with decluttering, and taking an inventory of your belongings. Ask yourself ‘What do you really need? What will you have room for in the future? What can you give away or sell? Although there are many more elements to downsizing, these points are essential and should be included in your initial downsizing change of mindset.

Although downsizing may be a fit for many, downsizing is not for everyone, we’ll try to explore many of the factors related to downsizing throughout this article.

Why Do People Downsize?

What Exactly Is Downsizing?

Typically, downsizing is the act and process selling of a larger home in exchange for a much smaller home, along with the advantages and benefits that decision provides.

Lifestyle Change

The needs and lifestyle you have now are likely much different than your needs and lifestyle 25, 30 or 35 plus years ago. In addition to not needing a large home and property, you may want a different lifestyle than the lifestyle you had years ago or at earlier stage in your life.

Your downsizing needs should reflect this change in lifestyle. At this stage in your life, you hopefully have a tidy sum tied up in the equity in your home, which can be very beneficial with your upcoming downsizing plans and lifestyle change.

Living Space Reduction

The motivation for downsizing varies. In most cases, the primary reason is the preference for a reduction of space and the cost benefits that accompany such reduction.

Other Downsizing Motivations

Other reasons may include:

Your home is just too big, not using the rooms. Upkeep of unused rooms etc. The home just doesn’t fit your lifestyle anymore
You want to pay off debts and stay out of debt
You can now manage your career remotely, with no need to have a home so close to work. This may provide the motivation of home downsizing
Your children have grown up and moved away, so there is no need for so much space
Access to additional capital (usually tax free). Using your home’s equity for retirement income or pay off debt when moving to smaller home
Not living in the home year-round, e.g., ‘snowbirds’
Travel aspirations funded by additional equity
Increasing energy costs and reduction in monthly bills. Heating and cooling of large home when rooms are not being used. If your monthly household expenses are continually increasing and your income is fixed, this may be a cause for concern
You may be falling behind in your home upkeep or maintenance and cannot afford those expenses. You may want to avoid future home projects or keeping up with major repairs, repairs which will need to be completed which may affect the home’s value
Moving closer to children and grandkids
Urban living and a lifestyle change
You may not be happy in your current neighborhood (changes over time), and you prefer to move to a more like-minded or age relevant neighbourhood or community
Reduced housework, including cleaning, maintenance, yard work, such as lawn care, snow shoveling etc.
Bungalow Selection and Availability. There may be a growing shortage of accessible single floor homes as you get older
You may have become a minimalist and have purged most of your belongings, or have decided to reduce your footprint on the planet and want to move to a much smaller home
Marital issues may be forcing you to downsize your home, along with the reduced costs and other potential options
Minimalist living

Financial Constraints at Retirement

As we will detail in the ‘Carrying a Mortgage While in Retirement’ section in this post, a growing number of Canadians will still have a mortgage at retirement age. A 2021 report (Statistics Canada) showed that people aged 65 years and older account for 13% of Canada’s mortgages.

Downsizing Alternatives

If your downsizing initiative is primarily due to financial constraints or financial issues at retirement age and you would prefer to remain in your home and have access to some of your equity, without increasing payments, there may be another alternative. This alternative isn’t a fit for everyone, and we will touch base on that alternative in the ‘Reverse Mortgages’ for Retirees section of this article.

Is a Reverse Mortgage a Fit for You?

We do not advocate for or provide Reverse Mortgages; however, we can help you decide if it’s a fit for you, and provide downsizing alternatives, if possible. If we are not your ‘closing’ lawyer, we can provide the mandatory preliminary legal counsel to you which is required by the lender and complete the initial forms. We are not suggesting, recommending, or promoting this alternative, we are just offering some insights for those who may have a financial burden and want to downsize but are unable to and need other alternatives.

The Benefits and Advantages for Downsizing

In addition to cost benefits, there are other downsizing benefits, including safety reasons and accessibility, reduced expenses, and maintenance to name a few.

Small Home Benefits

If you are considering downsizing, the primary reason may be related to the ‘literal’ definition of the term. You want a smaller home and the many benefits of a smaller home.

Smaller homes are usually much less expensive to buy, which may provide access to available home equity. This benefit is especially appealing if you move to an area with much lower real estate home prices, which provides more buying power for that unlocked equity in your home
Potentially lower municipal taxes
In addition to possibly being more unique, smaller homes are usually much less expensive to maintain, saving you money on monthly bills, therefore less stress about bills and upkeep. Smaller homes are often much more energy efficient; they use less energy and therefore may cost less to heat and cool
Smaller homes may reside in older communities with an older and larger tree canopy. This canopy may be appealing and offer energy efficiencies during the summer and the winter
Reduced risk of injury, e.g., stairs, large home, large yard etc. Your small home may be more accessible as you grow older
Less maintenance and cleaning. You have a lower or reduced burden of keeping your home maintained, and less costs
Smaller homes may offer a benefit of being more cozy and personally comfortable
Reduction on the number of decisions related to such a large home. Less clutter and less stuff

Lifestyle Opportunities

With the additional equity acquired from a downsized and cost-effective smaller home purchase, these additional funds can provide lifestyle opportunities and benefits, including:

Living in an area or geography with high retirement lifestyle appeal
Outdoor living activities
Entertaining friends in a cozy environment
World travel
Starting a new chapter in your life (e.g., widower/widow, empty nester, divorced)

How Downsizing Helps Empty Nesters

During your lifetime, you and your spouse may have upgraded your homes for career, geography/location, status, or for additional space reasons when you started your family. You may have upgraded even further as your family expanded and your space needs changed.

Future Planning

Fast forward twenty or so years, with the children starting lives of their own, you now have a large home with empty or unused rooms. This unused space wastes energy and adds maintenance costs.

Even though you or your spouse have many years before retirement, you’re considering the downsizing of your larger home to one much smaller. What’s the point of maintaining, heating, and cooling your larger home if no one lives in most of it? In addition, although your major appliances (e.g., air conditioner, furnace, etc.) and home structure (e.g., roof, windows, etc.) are in good and working condition now, major repairs and replacement will creep up over time.

Maintenance and Work Effort

Although home upkeep and housework, like house cleaning, yard work or shoveling snow are not issues at this point in your life, you either do the work yourself or pay someone else to do it for you, so that’s not a driving factor to downsizing currently, however this may not always be the case. In the future you may not have budget or the energy or health for these maintenance actives.

Downsizing will help you to continue to build your retirement nest egg, by decreasing your monthly expenses and potential larger home expenses or projects.

RRSP Top Up

If you’re both still working, you may be continuing to contribute to your RRSP’s and build savings. In addition to having access to available capital from downsizing to a smaller and lesser valued home, using that available equity can build your savings, or top up both your RRSPs, if you have the room to top it up.

Time for a Change?

In addition to the financial benefits, downsizing may offer the option of moving to a smaller home and lifestyle that is more specific to your current needs. Perhaps the neighbors you have known for years have moved away as their children moved away on their own, and the new neighbors moving in are starting families of their own? You may want to move to a smaller home in a neighborhood or community that fits your current lifestyle.

Financial Downsizing

There are numerous reasons why you want to downsize your home when you have a choice. However, there may be compelling reasons why you may be forced to downsize. The reasons may include:

Marital issues, such as separation, divorce
Death of a spouse
Debt issues
Loss of income
Home expenses (and municipal taxes) far exceed available income
Credit issues, cannot renew mortgage

Equity as an Asset – Bucket List

Aside from financial burdens, there may be those who have no further use for a home and want to use their home equity (while they are still healthy and energetic) to fund their bucket list. Essentially allowing them to use their home equity for travel, learning, working by choice not necessity, hobbies, or a different lifestyle at home or abroad.

Discretionary Income

The smaller home you are moving to usually is much less expensive in value than your current home, which means there will likely be significant equity that you will have access to. The smaller home may also cost less to maintain, so in addition to

The smaller home may also cost less to maintain, so in addition to having the equity funds from your larger home sale in your account, you may also have more discretionary income available every month.

Financial Flexibility

You have financial options if you want to pay down debt. If your home has increased in value over the years, you can pay down debt or invest the equity. Or, you may have additional financial goals you want to achieve. In addition, you may have a bucket list you want to check off, such as:

Renovations to the smaller home, to customize it somewhat to your needs
Smaller home projects, if required and if necessary. Update the smaller home’s roof, air conditioning and furnace, while you are active and healthy
Continued learning. Go back to school
Travel or live abroad
If you are healthy and active, activity-based experiences may be an option. ‘Once in a lifetime’ experience that you’ve always dreamed of and now have the financial means to do (specialized climbing trips, cycling tours, wine tours, around the world boat cruises etc.)

Being A Minimalist. Some Just Want a Smaller Home – Less Stuff and Less Space

Smaller Footprint

There are those, who over time, have decided to reduce their footprint on the planet, and liberate themselves from consumerism and owning unnecessary stuff and clutter in their lives.

Some may go to the extreme and divest themselves of most of their belongings and live in a modest lifestyle and home. There are others who wouldn’t consider themselves minimalists, however they welcome life in a smaller home free of the stuff and clutter they had with their larger homes.

Simplistic Lifestyle

A smaller home can offer a more simplistic lifestyle to those who can be happy with less, including:

More time and energy to spend on things you enjoy doing. Smaller homes are easier to clean and maintain, and allow more time and energy for other things you enjoy
Less clutter. Smaller homes have less space for storage, so there is less time spent on decluttering your living area
Financial freedom. More money at the end of the month. Reduced property taxes, and less or no debt and worries about unmanageable payments
Less space to want to fill things with, therefore less spending
Less things, less stress. A home is more visually appealing with less clutter
The less you consume for your smaller home, the better for the environment

Downsizing Isn’t for Everyone

There are numerous advantages to downsizing your home, however downsizing may not be a fit for your lifestyle or may not be an alternative that is available to you.

Research, Planning and Work Effort

As mentioned previously, prior to downsizing your home, you will need to do your ‘homework’. Proactive ‘downsizing’ research preparation is required and essential.

Downsizing Decisions and Work Effort

You will need to liberate yourself from much of your physical belongings, which won’t fit in your smaller home. Preparation is required for your current home’s sale and all the work effort and costs required for that transaction (required fixes/maintenance to the home, moving costs, closing costs, legal fees, realtor fees, etc.). Your remaining belongings will need to move to your downsized home and prepare your future home.

These activities are worth the time and effort for those that want to downsize, however for those without the resources required to prepare and act on these downsizing activities, downsizing may prove to be difficult.

Downsizing; Reflect and Reconsider

When you downsize your home, you will need to reduce the amount of stuff you have, such as furniture, clothes, equipment, tools, unused items, collections etc. This is a selected list of reasons for not downsizing:

You’re happy with the size of your home and neighborhood you live in and don’t want to move
Property values in the geographic areas you were interested in have increased proportionally with your current home’s value, therefore reducing the surplus home equity appeal
Financial goals. If you are considering downsizing for financial reasons, does the act of downsizing achieve these goals? Will it lead to a better overall financial picture for you?
Boomerang children. Your children have moved away, however there may be life events that may compel them to return home to live with their parents. Having that additional, currently unused space, means your children have a place to stay if their circumstances warrant it.
Home office(s). More and more people are working from home these days. A smaller home may have an impact if you and your spouse both work from home. If you both have your own home offices in your current larger home, a smaller home may mean that neither of you will have a home office and you both may be working in an open concept.
Home workouts. Same goes for working out, you may not have a workout room in a smaller home
If you enjoy having guests or family over to entertain, especially overnight, you may want or need additional space for additional guests staying the night
Personal space. Some people just need more personal space, larger homes offer options for those who need more personal space
Will your furniture fit in a smaller home? If you have larger furniture, workout equipment, office equipment, home entertainment devices (large screen TV you don’t want to part with), a piano for example, they may not fit in a smaller home
You may be concerned with the change in social status that a larger home may provide
You may not want to move away from friends or family, including your grandchildren
Difficulty finding a smaller home that meets your needs, including accessibility, in the neighborhood you prefer to live in
The added burden of travel to see your family if the smaller home is farther away
You enjoy the conveniences of your current home location
If you are not able to purge your stuff, you may not have the space in a smaller home
You have the financial means to keep up with monthly upkeep of your home
You’re healthy and active and don’t mind the house maintenance and are confident you will be for the foreseeable future
You may also have the financial means to have someone else perform the maintenance and upcoming costly projects such as a new roof, furnace, air conditioner etc.
You do not have equity in your home, which may make it difficult to benefit from the downsizing equity exercise
Downsizing will require a purge of your household items; a smaller home won’t have the room for your stuff. Perhaps you’re not ready for this undertaking?
Lastly, this smaller home may be your last. Do you see yourself growing older, safely, and comfortably in this home?
Proximity to your medical specialists, doctors, dentists etc. or community resources

Disadvantages of a Bungalow Vs. a Two-Storey Home

Although a bungalow or single-story home may be an appealing choice for your downsizing destination home, there are factors that should be considered.

Many bungalows were built many years ago, which means they may have the advantage of a larger property size which can offer more privacy, they may also need more outside maintenance.

Home Size Needs and Considerations

In some cases, the internal size of the bungalow can be much smaller than a two-storey home, therefore upkeep, maintenance and cleaning of the home requires less effort. Larger bungalows that offer similar square footage to a two-storey home will have a much larger footprint on the property lot size, and more work effort is required.

Bungalow Availability

Many newer homes have two storeys and are being built on smaller lots. This also means that bungalows may be in high demand as people want to downsize in an area. Bungalow availability may be limited and may also be selling at premium prices.

A single storey home generally has limited number of stairs, which is safer and beneficial as the homeowner ages, and an added safety benefit when your grandchildren visit. A single floor also makes it much easier when babysitting your grandchildren. That being said, a bungalow may be a bit noisier. A single storey home has all the rooms on one floor, which means the noise from the living area, dining room and kitchen may disturb those who are sleeping in the bedrooms which are located on the same floor.

Bungalow Renovation

If you do decide to downsize to a bungalow, be aware that bungalows may be owned by older people who have dated preferences and tastes, and different lifestyles. You may want to make changes and renovations. Having said that, bungalow renovation is much more flexible, as you have less load-bearing wall restrictions.

Bungalow Security

If you are security conscious, a bungalow may not be a fit for you, especially if you prefer to have open windows or sleep with windows open, compared to a two or three storey home. Most if not all windows on a bungalow or single storey home will be accessible or near accessible from ground level.

Bungalows have merits for the right homeowner who understands its advantages and disadvantages of the style of home.

Carrying a Mortgage While in Retirement

Mortgages and Retirement

Although not ideal for those retiring, there are many individuals and couples who will be carrying a mortgage into retirement. A recent Globe and Mail article (‘More Canadians Are Carrying Their Mortgages Into Old Age, and It’s Complicating Retirement Plans’) detailed that many retirees will still be paying off their mortgage into retirement, and that number is increasing year over year.

Statistics Canada Report

In 2021, a Statistics Canada report showed that 1.5m people older than 65 years still had an outstanding mortgage on their property. CMHC data reported that people in this age group account for 13% of Canada’s mortgages, compared to 7% in 2017.

Many retirees who are considering downsizing, have considerable equity in their home. They may have timed their mortgage renewal with their retirement and downsizing plans and are planning on paying their current mortgage off with the eventual home sale and then using that equity to purchase a downsized home outright. This could be a possible strategy, depending on your home sale funds and the amount of the new downsized home. Mind you, the home sale equity may use all the equity of previous home sale, which would negate any other retirement plans you had for that equity.

Mortgage Approvals at Retirement

Carrying a reduced mortgage (access to some of your previous home’s equity) on the downsized home would be demonstrating to a mortgage lender that you have the financial resources and means (home sale equity and retirement income) at retirement to service your downsized mortgage debt (after downsizing). This option may be more appealing to a lender if you are essentially debt free, and the mortgage value is reasonable and it’s a short mortgage term. Depending on the amount of your equity, this approach could be a viable option for some, however, depending on the value of your equity, your financial resources and retirement income, it may be best to adjust and align your expectations with your lifestyle and financial means.

There is another mortgage financing option for retirees, that option is a ‘Reverse Mortgage’, which we will touch base in the next section.

Reverse Mortgages for Retirees

Reverse Mortgages Pros and Cons

Most of us have watched the commercials on TV about Reverse Mortgages. Some of you may even currently be pursuing a Reverse Mortgage. However, prior to your finalizing a Reverse Mortgage, it may be beneficial to consider the many benefits of downsizing outlined in this article.

Downsizing Challenges

For those who need to downsize for lifestyle, financial or marital issues, and those efforts have been met with challenges, such as low post sale funds equity after purchase (e.g., downsized home has a higher price than expected), there may be another option if you have financial burdens yet can’t make the downsizing alternative happen.

A Reverse Mortgage isn’t for everyone. We do not advocate for or recommend Reverse Mortgages. We are just providing an alternative to the few that may be in a financial bind and cannot downsize.

Equity Access

A Reverse Mortgage doesn’t get you out of your home, but it’s does give you access to your some of your equity with the benefit of making no payments on the Reverse Mortgage (there are terms and conditions).

Although Reverse Mortgages and Downsizing are two separate approaches, they both have their merits as a remedy for the right issues or challenges, or lifestyle. Everyone’s circumstances differ, a Reverse Mortgage may be the answer for some individuals, however an effective downsizing strategy could help cut costs with minimal risks, compared to a Reverse Mortgage strategy.

Property Value Increases

For those people who are making plans to downsize and reap the rewards of high current home resale with the potential high equity as a result, they are often surprised or shocked when they find-out that the geographic areas they were planning to move to have also increased significantly in property values, possibly negating a significant home equity nest egg.

Misalignment of Expectations

These increases in property values may make the downsizing strategy much less appealing for some. For those who are still servicing a mortgage and still have many years left on their mortgage, the downsizing approach (and access to funds from the equity) was part of their retirement, financial and lifestyle change strategies.

If a downsizing plan doesn’t come to fruition because of a misalignment of expectations and property values, there may be an option for some that allows them to stay in their current home, get access to their current home’s equity, and not worry about mortgage payments.

A Reverse Mortgage approach wouldn’t be a thorough downsizing exercise. It may however provide an alternative for those who want to downsize but are not able to or are delayed in their plans to downsize when property values in the desired rural or geographic areas potentially decrease in value.

What is a Reverse Mortgage?

A reverse mortgage is similar to any other typical loan that is secured by way of a mortgage against a piece of real estate you own. The unique quality to a reverse mortgage is that there are no mandatory payments required to be made against the principal balance of the loan amount or the interest that accrues. Instead, interest will accrue on the loan amount, both of which will become due when the borrower(s) moves, sells the home they are living in, or passes away.

Reverse Mortgage Criteria

A ‘Reverse Mortgage’ isn’t for everyone. In fact, you must be living in your home, be 55 years or older to qualify and own a home with $250,00 minimum value.

A Reverse Mortgage may appeal to those who have limited savings, yet have significant equity in their current home, and own their home outright, or have little to no balance on their current mortgage. A Reverse Mortgage can provide up to 55% of a home’s equity, for example: if you own a home that is worth $2,000,000, you may qualify for a loan equal to up to 55% of the equity, being $1,100,000.00. In this scenario, the lender would advance you the loan amount, and no regular payments would be required to be made until the home is sold or the owner passes away.

Reverse Mortgage Details

Homeowners must be 55 years or older, the older you are the more you can borrow
Primary residence. Must live in the home six months out of each year
For detached, semi-detached, townhouse or condo’s
Property title holders are joint borrowers
Interest accumulates
Current mortgage will need to be paid out first

Reverse Mortgage Benefits

Access to home equity (tax free), up to 55%
An option if you have major expenses, limited retirement funds or income
No monthly mortgage payments
Stay in the home you have now (with all your stuff)
Use the funds for the list you were planning on with the downsizing approach

Reverse Mortgage Disadvantages

Higher interest rates, which can vary. Reverse Mortgages will have higher costs than a conventional mortgage
Possible forfeit of future home equity. This means that if you do eventually sell your home, you will have less equity available
Compounded interest. Interest can accrue quite quickly under a reverse mortgage, eroding the equity in your home
If you have a balance on your current mortgage, the Reverse Mortgage funds would need to pay out the current mortgage balance first. Would there be any funds leftover? If not, other than the ‘no mortgage payments’ benefit, is it worthwhile or worth the risk?
Pre-payment penalties. If you pay off the reverse mortgage before the end of the term, there are likely to be pre-payment penalties that will need to be paid as well.
Reduces home equity
Possible issues if home values fluctuate. Specifically, the potential loss in home equity.
Legal fees. The fees are a disadvantage, however the purpose of the fee is an advantage, if you are considering a Reverse Mortgage. An independent lawyer (ILA, Independent Legal Advice), separate from the lender’s lawyer is required to ensure the person(s) signing a reverse mortgage loan is of ‘sound mind’, aware of all the terms and condition and registration and processing fees
Retirement income from the start of the Reverse Mortgage would need to be sufficient to cover all home utilities bills, property taxes, expenses, etc.
Set up, Closing/Administrative fees

Conclusion

While downsizing may initially appear to be a daunting task and there are many tasks that will need to be attended to, with thorough and thoughtful planning your downsizing exercise can be both financially beneficial and rewarding as a new lifestyle opportunity.

We trust that this guide will provide some direction and value while performing this important next step.

We’ve included one of our previous blog posts which may also be of interest to you.

Six Critical Factors To Consider Before Buying Your Next Home

If you would like additional information about Nichols Law, please visit our website.

Sources and Additional Information

Disclaimer

10 Tips on How To Downsize Your Home, Rocket Mortgage

How To Downsize Your Home in 6 Simple Steps, LifeStorageBlog

Why Downsizing Your Home in Retirement May Not Be As Simple as You Think, The Globe and Mail

Should You Stage Your Home When Selling?, The Globe and Mail

Is It Time To Downsize Your Home?, Sun Life

4 Mistakes People Make When Downsizing in Retirement, Investopedia

Some Young Canadians Are Downsizing Their Homes To Cut Back on Their Expenses, Toronto Star

Downsizing Your Home in Canada: What You Need To Know, Pine

Downsizing After Retirement: A Complete Guide, HomeEquity Bank

The Top 5 Downsizing Mistakes, Good Times

Home Downsizing Pros and Cons, the balance

What’s the Perfect Age To Downsize?, webbuyanyhouse.uk

How To Downsize Your Home: 13 Tips To Declutter and Get Moving (to Your New Home), LendingTree

A Comprehensive Guide to Downsizing Your Home, This Old House

When To Downsize Your Home: 10 Signs It’s Time To Sell, HomeLight Inc.

Renting vs. Buying a House: Which Is Better for Retirement?, Sun Life

How To Downsize Your Home Before a Move, Budget Dumpster

11 Things To Do Before You Downsize Your Home, According to an Expert Who Gets Hired by Seniors To Help Them Declutter, Business Insider

How To Choose a Reputable Moving Company, LifeStorageBlog

Must-Know Downsizing Tips for Your Move to a Smaller Home, Better Homes & Gardens

Downsizing Your Home; How To Downsize, What To Consider, Comfort Life Retirement Living

When to Downsize Your Home: 7 Signs It’s Time to Put That Big Old House on the Market, Homelight

Risks and Process of Retirement: Housing in Retirement, Society of Actuaries

Seven signs that it’s time to downsize your home, LowestRate.ca

Should You Downsize Your Home Once Your Children Move Out?, Millionacres

Downsizing your home in retirement, BNN Bloomberg

How to Decide If Downsizing Your Home When You’re in Debt Is Worth It, Credit Counselling Society

Downsizing after Retirement: A Complete Guide to Downsizing Costs in Canada, Home Equity Bank

Downsizing Your Home in Canada Can Offer Many Benefits for Snowbirds, SnowbirdAdvisor

The pros and cons of downsizing your home, ReallyMoving

The Challenge of Moving to a Smaller Home, The Simple Dollar

10 Things to Consider When Downsizing to a Smaller Home, Moving dot com

Could You Survive in 150 Square Feet? The Lowdown on Tiny Homes, US News

12 Reasons Why You’ll Be Happier in a Smaller Home, Becoming Minimalist

Tip Tips to Help You Downsize When Moving to a Smaller Home, Meyer Household Moving

Benefits of Minimalism: 21 Benefits of Owning Less, Becoming Minimalist

Six Critical Factors to Consider Before Buying Your Next Home

Posted on October 3, 2022

Introduction

Over the years we’ve been asked many questions relating to real estate, mortgages and home purchases. This blog post focuses on six of the most frequently asked questions we receive about our client’s home purchase journeys.

Real Estate Processes Change Over Time

There may be many reasons why you are considering your next home purchase.

Perhaps your family is growing, you want to change your neighbourhood environment or home style, or perhaps you want to upsize or downsize your current home.

Regardless of your reason, unless you are purchasing real estate on a frequent basis, you may not be up to date on the recent changes to processes with buying and selling real estate.

Who Is This Blog Post For?

This blog post is written for both those who have purchased a home previously, first time home buyers, or those who are also selling their home.

Purchasing your next home can be as much of an undertaking as buying your first, especially if it’s been a while since you purchased your current home.

We trust that this post will assist you with your next home purchase endeavour.

There will be many acronyms and terminology used during your home buying or home selling process, many of them may have the same meaning, so we’ll try and highlight as many of them as possible.

Our Blog Post Objective

The objective of this post is to provide you with insights, suggestions, and recommendations, based upon a collective of actual experiences with our own clients.

We’ve gathered these experiences into the ‘Six Critical Factors to Consider Before Buying Your Next Home’.

Whether you’ve purchased previously, or this is your first time, you may be surprised by the amount of work involved throughout the entire home purchase process.

From the very beginning when you first thought of buying a new home, to the very end, when you finally moved in and began settling into your new home.

Our clients often ask us similar questions, including:

1. Once we have signed the Agreement of Purchase and Sale (APS), what do we have to do next?

2. Why does the mortgage approval and home closing processes take so long and seem so complex? What actions lead to disappointments?

3. Why does the whole home ownership process appear to leave everything until the last two weeks?

4. What can we expect after Closing, what should we expect next?

5. How do I make sure the appliances we agreed upon in the offer are included? And in working order when we move in?

6. When can the deal be cancelled, if we decide not to buy the home after we have signed the legal paperwork? What happens to our deposit?

We’ve included experiences and insights within this post which will try to answer those six questions.

The information in this post may also serve as a reminder or as additional reference material for you if you are already familiar with these questions and experiences.

This post will focus on the real estate home purchase steps that attract the most attention and questions, especially in the last two or three weeks of that home buying journey.

Some of the most common issues we have experienced with our clients when real estate is being purchased:

✓ Home inspection issues

✓ Property Title issues

✓ Seller ownership title issues (seller does not have legal ownership)

✓ Appliance inclusion or appliance condition, and workability issues

✓ Fixture inclusion or fixture condition and workability issues

✓ Fixture removal home damage

✓ Legal survey issues

We’ll provide additional background about these issues throughout this post. We will also be referencing many real estate terms. We’ve highlighted the primary terms, which you may want to re-familiarize yourself with below.

Terms and Key Documents To Know Before You Get Started

Although very rare and unlikely, your agent or broker, may still be entitled to their commission even though the property sale didn’t close.

There is a clause in the listing agreement you should be aware of which entitles the broker, realtor, or agent to claim their commission, in the event an offer to purchase the property is received, at the listing price. Even though it’s rare, talk to your lawyer prior to signing any agreements. We’ve provided two relevant articles in our Sources and Links at the end of this post.

1. The Realtor ‘Buyer Representation Agreement’ and the ‘Listing Agreement’ (if you are selling).

2. Mortgage Lender Pre-Qualification and Pre-Approval process documents, including application, credit check and Commitment Agreement.

3. Agreement of Purchase and Sale.

Buyer Representation Agreement and Listing Agreement

One of the first resources you will need to work with is a real estate agent. Professional real estate agents and realtors want to provide you with the best service that they can and work in your best interests.

In order provide these services, and avoid any misunderstandings, they will want to outline the services they will be providing to you, and what they also expect from you.

Buyer Representation Agreement (BRA)

If you’re buying a home, the outline of services provided will be in the form of a representation agreement called the Buyer Representation Agreement. This contract will define the business relationship with your real estate agent.

This agreement will enable your real estate agent to work on your behalf throughout the home buying process, including home buying selection, negotiating, some level of informal inspection assistance, and the paperwork involved.

Legally, you will need to sign this contract if you want to engage the real estate agent with your home buying process.

Listing Agreement

Essentially, if you’re selling a home, the outline will be in the form a representation agreement called the ‘Listing Agreement’. This document is a formal contract between the home seller and the real estate brokerage who represents the homeowner after this agreement has been signed.

Your realtor can expand on the importance and details of these documents.

Most importantly and depending on if you are selling or buying (or both), if you are uncomfortable with the document(s) or do not understand either of them, do not sign them until you do understand their contents and are comfortable with them.

You can always ask your lawyer for direction prior.

Although this blog post doesn’t cover every real estate and home purchase component and issue, we’ve highlighted other critical components within this document based upon our own client-based experiences.

A few additional terms to be clarified:

Closing Date, also known as Completion Date, are terms related to when the transaction closes.

If you are purchasing, this is the date on which you get keys and possession of your new home.

This is the date that the homeowner usually takes possession of the home. This is the step when the buyer receives the keys to the home and is legally allowed to move in, usually no later than 6:00 p.m. on closing day. Which allows the sellers and buyers lawyers to settle the last paperwork and process requirements, and the previous owner to vacate the premises.

If you are selling, this is the date on which funds are delivered to your lawyer and the date by which you have to relinquish possession.

The timing on when you as the seller will receive funds depends on how quickly your lawyer receives funds from the buyer.

If funds are received early to mid-day, it is likely that you will receive funds the same day. However, our experience is that funds are generally not receiving until the afternoon, pushing the actual receipt of funds by the seller to the following business day.

Please continue reading for details related to ‘‘Six Critical Factors to Consider Before Buying Your Next Home’.

Six Critical Factors

to Consider

Before Buying Your Next Home

1. We’ve Signed the Agreement of Purchase and Sale. Now What?

The Closing Date

Once you have signed the APS, you will soon be in your new home, as outlined by Closing day in the agreement in the APS.

The Seller and Buyer will agree on the Closing Date, on average once the APS has been signed you usually have approximately 30 to 90 days, more or less, to start your preparation to move into your home.

Activities After the APS Has Been Signed

When the Agreement of Purchase and Sale has been signed and all terms and conditions have been satisfied by both parties, the contract is a legally binding agreement. This leaves a period between the APS being signed and the Closing Date.

It is this period of time that you will use to finalize your financing, insurance, moving arrangements, setting up utilities and work with your lawyer to satisfy any other conditions required for closing.

Timing Varies

The amount of time you have prior to closing varies and will be detailed in both the Offer to Purchase and the Agreement of Purchase and Sale.

This duration of time for closing is agreed upon by the Seller and the Buyer, although this period is usually depending on the seller’s needs and is usually disclosed when the property is listed.

Here are the most important tasks you need to do once the APS is signed:

1. The Deposit

Once you have signed the APS, you usually need to get the deposit to the Seller’s real estate agent promptly, usually by the next business day. So, a visit to your bank or financial institution is essential to get the deposit.

2. Financials – Mortgage Lender/Banking

Be Proactive and Be Patient

In most cases you will have limited time to get your financing organized, this allotted time will be outlined and agreed upon in the APS.

As soon as you sign the APS, you need to visit or contact your mortgage lender and provide the details of your offer to purchase, so they can get your funds approval process started.

Mortgage Lenders Can Get Very Busy

Mortgage lenders can be very busy, they may need day(s) to process your mortgage financing.

They may also need to schedule an appraiser to validate the value of the home. Scheduling an appraisal may take some time, if so, the three to five days agreed to in the APS could be exhausted quickly.

Finance Conditions and Clauses

You and your real estate agent most likely requested ‘conditions or clauses’ in the APS, one of them is often a ‘financing condition’ and the other is an ‘inspection’ condition.

Having a finance condition protects you if you cannot get financing and it also ensures your deposit is returned.

You will need to get the mortgage financing in order as soon as possible to have the finance condition waived on the APS. Having the ‘finance condition waived ‘is important, it demonstrates that you have the required funding and that the deal is likely to be successful.

Finance Arrangement Timing

Most sellers will agree to three to five days for the buyer to arrange financing which will usually be specified and detailed in the APS as a ‘finance condition’.

Sellers usually don’t want to go much longer than 5 days, that is a long time to have their home off the market if a buyer’s financing falls through.

3. Inspection

If a home inspection (as per the APS, you probably included a condition/clause for home inspection) hasn’t been completed prior, now is the time to schedule the inspection, which is usually scheduled 2-3 days after the signing of the APS.

You don’t have an inspector? Your real estate agent will probably have a

few inspection references for you.

Complete This Task ASAP

The inspection condition is another task you want to complete as soon as possible.

Home inspection. A close up and high angle view of a professional male wearing blue t-shirt, writing out forms during a home inspection, standing on stairs. — .

You will want to have the inspection, get the inspection report, and discuss the findings with your real estate agent.

In addition to the core inspection criteria, ensure that appliances that are included are inspected and are in working order.

Inspection Is Not a Negotiation Tool

Keep in mind that unless the inspection discovers and identifies a severe issue with the home, or other serious issues, like missing or broken appliance(s), the inspection is for identifying future maintenance or updates for buyer and the new homeowner.

The inspection is not usually a negotiation tool, although if the issue discovered is severe, it could be a deal breaker.

Buyer Visits or Walkthroughs

Testing On Closing Day

Be aware that you will usually be allowed a couple of ‘buyer visits’ or ‘walk throughs’, these visits are not inspections or a time to test appliances.

If the appliance works today, there is no guarantee that it will work when you take possession, so leave the Closing Date to test everything in the house.

In addition, if you were to test an appliance, like a washer or a dishwasher and there was a flood or damages (it’s happened) during a walkthrough, you could be liable for damages.

Other Purposes for Inspection

Buyer visits or walkthroughs help you plan for decorating and design, purchasing fixtures, paint colors, fabric choices, fitting your current furniture and buying new, among other planning ideas.

Keep your visit brief, you are usually only provided with about an hour per visit.

4. Waiving of Conditions and Clauses

Once you have secured your mortgage financing and have your inspection issues or other condition actions satisfied, you will want to inform your real estate agent to have your conditions waived.

With the conditions waived, your home purchase can proceed towards closing day.

5. Home Insurance

Now is the time to re-connect with your home insurance provider.

You will need to provide home insurance details and coverage to your lawyer.

Your mortgage lender should have provided you with the details of insurance required. Contacting your home insurance provider well in advance of closing day is highly recommended.

6. Utility Accounts

If you haven’t already, create a checklist of all your utility accounts and provide notice of terminating your current address particulars and if applicable transfer to your new address.

7. Keys and Alarm

You will receive your keys shortly; however, you will want to change the locks on all the doors, change security alarm codes (make sure your lawyer gets them during the transfer).

During your home inspections and walk-throughs, take note of the doors with locks and how many door locks you will require.

8. Mover/Moving

Prepare a project plan and check list of your moving activities.

9. Current Occupants Haven’t Left the Home

Although it’s very rare, prepare a back-up plan in case the previous owners haven’t vacated the home when they were supposed to, it can happen (see in our Sources and Links at the end).

An additional condition or clause in the APS, outlining the clear expectations and an understanding of when the previous owner will be totally vacated from the buyer’s new property may be of interest.

10. Furnace Filter

It may be a good idea to prepare to change the filter when you arrive at your new home. Perhaps get the filter part# in advance, during a walkthrough so you can have a new filter the day you take possession.

2. Be Patient, Mortgages Can Take Some Time

Many of our clients have asked us why the purchase process takes so long. Especially the mortgage lending process.

We’ve provided some insights that may help you with these questions.

Also included are a few critical insights that you should be aware of, insights which could not only delay the mortgage process, but could terminate the home purchase altogether.

Once you have decided to start looking for a new home and have been in contact with your real estate agent and your lawyer about your next home purchase plans, there are many processes and steps which are about to be set in motion.

Over the course of your next home purchase journey, you will be contacting, working with, and communicating with many stakeholders, including your:

Lawyer
Mortgage lender
Real Estate agent
Insurance agent
Home Inspector
Others

Being Prepared Is Key

To limit and reduce last minute items which can delay or even terminate the home purchase process altogether, your preparation is crucial with each of these stakeholders.

The work effort of these stakeholders will significantly increase as the Closing Date nears, especially the last two weeks, so as a buyer (or seller) ensuring that you are not a bottleneck or obstacle in these important and time sensitive milestones.

Being Proactive

Be proactive and ensure that they have all the documents, your attention and your response when needed. Ask them how you can ensure the process is flowing smoothly from your end.

Get Started Early

The involvement of key stakeholders as early as possible in the process, including your mortgage lender, lawyer and real estate agent is critical. Re-familiarizing yourself with the mortgage lending process is very helpful, if you haven’t purchased or sold your home in a while.

This particular has become incredibly important, as the rules for mortgages have changed drastically over the past several years, in what is a relatively short time span.

Your home purchase stakeholders will often use different names for the same terms. For example, a ‘Pre-Qualified’ and ‘Pre-Approved’ mortgage are the same.

There are ways that the home buyer can assist with the process. Being prepared with up-to-date documents for your mortgage lender. These documents include:

T4 slip from previous year
Notice of Assessments for the previous 2-3 years
Current pay stubs
All Credit and debt details
Details about your employment history
Identification
Proof of Citizenship and Residency status

Credit Checks and Purchases During the Mortgage Approval Process

Having credit issues or applying for credit during the mortgage process can have a severe effect on your mortgage application and approval process.

During this period, take a break or pause any debt applications and any credit application activities, including credit checks, which may affect your credit.

It may be a good idea to defer these activities until you have moved into your home and the mortgage has been closed.

Pre-Qualified and Pre-Approved Mortgages

Pre-Qualified and Pre-Approved Mortgages – Similar Terms

Essentially, these two terms are similar, mortgage lenders and real estate stakeholders can often use these terms interchangeably. However, being ‘pre-qualified’ doesn’t not mean you have been ‘pre-approved’ for a mortgage.

Being pre-qualified by your mortgage lender is usually an initial step towards mortgage approval, however your mortgage has yet to be approved.

Pre-Qualification Process

Pre-qualification discussions with your mortgage lender usually focus on affordability, your debts, your income, and debt serviceability (and other items), it may even include a mortgage ‘stress test’ to ensure you can make your mortgage payments.

Many Steps in the Mortgage Financial Approval Process

There are many steps prior to having a mortgage approved, pre-qualification is only the first step.

Your mortgage lender may need an appraisal performed on your home, which may or may not be the same as the purchase value. If the appraisal is lower, that could be a big problem, and may require a larger down payment.

It is possible that the appraisal may only be performed once you have signed the ‘Agreement of Purchase and Sale (APS) and have requested a mortgage approval, which may affect closing timelines.

Be Proactive

Being proactive with your mortgage lender, early in the home buying journey is essential. Discuss these potential issues with your mortgage lender and ask for advice to limit any last-minute frustrations or surprises.

Your mortgage lender can help you navigate proactively throughout the process to limit approval issues.

Be Thorough With Your Mortgage Lender

Discuss and understand the entire mortgage approval process with your mortgage lender. Review the value of the homes you are considering along with your affordability and being able to service the mortgage payments.

Ensure that you understand the mortgage lender’s appraisal process and it’s timing, and how that may affect your home purchase.

Mortgage Calculators Are Not Commitments

During your mortgage application meeting or discussion, most mortgage lenders provide you with simple mortgage payment calculators that will show you how much your payments will be based on varying down payments.

These calculators are not commitments.

A verbal approval or email may not be an official commitment to provide you with funds you will need, although it might be with some lenders. It is critical to understand the mortgage lending process specific to your lender.

Your mortgage specialist will need to outline their mortgage lending approval process with you and when your funds would be available.

Contact a Lawyer Early in the Process

At this early phase in your home purchase, it may be a good time to contact a lawyer. If you still have your lawyer from your last home purchase, great. If not, contacting a good lawyer (e.g., referral) early in your home purchase journey is vital, and who you should speak with

prior to signing important documents.

Mortgage Lender Communications

Most mortgage lenders have a formal communication process that includes notification of your mortgage approval, based upon current home appraisal, debt, credit history and income details.

This communication is often an email referencing your mortgage approval details, and perhaps an email attachment with an approval letter. Ask your mortgage specialist how they will communicate that official approval to you.

Mortgage Commitment Letter

Not be confused with ‘Pre-Qualified’ or ‘Pre-Approved’ mortgage terms, this term is usually used for the formal communication from your mortgage lender directly to your lawyer, indicating that mortgage funds have been allocated or available for transfer, usually the day of closing.

Obtaining a mortgage commitment letter indicates that the bank is satisfied that you are able to afford a certain loan, at a qualified interest rate. However, the mortgage commitment letter will contain various conditions requiring approval, prior to funding taking place.

Mortgage Approval Process Awareness – Selling Price vs. Appraisal Value

Appraisal Details

Another critical component that can affect the duration of a mortgage approval duration and process is the appraisal value of the home you want to purchase. Especially if the appraisal is performed during the mortgage approval process and the home appraisal value is now lower than the selling price.

Property Appraisal Process and Timing

There is a bit of a disconnect in the mortgage application process, in this regard.

It is uncommon for a lender to conduct an appraisal on a property until and unless you have signed and accepted an Agreement of Purchase and Sale. However, the appraisal of the property will directly impact the amount your lender is willing to lend you.

The reason being lenders have very strict rules on debt-to-equity ratios. That is, the lender will not loan more than a certain percentage of the value of the property (a value that is confirmed by their appraiser). It is a very much a chicken and egg scenario, as you won’t know what your lender will agree to lend, until your appraisal is completed.

But you won’t get an appraisal completed, until you have signed and accepted an Agreement of Purchase and Sale. This is why it is important to be very diligent when it comes to submitting an offer close to your “spending-limit”.

If the selling price of your home is higher than mortgage lender’s appraisal, this can cause stress, disappointment, and frustration, along with delaying, or even terminating the home purchase, and possible loss of a down payment.

Mortgage Approval Example

As an example, if the home you want to purchase is selling for $1,500,000, you will need 20% down for the mortgage (mortgage lender/bank lending maximum for your home is 80%).

The maximum mortgage amount (80%) would be $1,200,000 and your down payment would be $300,000.

However, if home values in your area have been declining, and the mortgage lender or bank’s appraiser now values the home for $1,350,000 instead and the house sale value is $1,500,000, the down payment will need to be increased to make up the difference. Which would be $420,000, a possible gap of $120,000.

This could be a deal breaker, if the home buyers are unable to increase the down payment.

Finance Conditions or Clauses

Be Careful Removing Conditions and Clauses

Competing for the purchase of a home is not uncommon. To be successful with the purchase of a home, agents and buyers often remove conditions or clauses that the seller may find obstructive compared to other buyers offers (e.g., finance or home inspection conditions).

Tread carefully with the removal of conditions which are included to protect your interests.

Risk Reward of Conditions and Clauses

You and your real estate agent will need to balance the risk/reward of adding or removing conditions and clauses.

As stated in the Mortgage Approval Process Awareness – Selling Price vs. Appraisal Value previously, if the ‘financing condition’ had been removed, the buyer would need to increase their down payment, and if not, they may lose their deposit or may be liable for other costs incurred by the buyer for the terminated deal.

Two of the most helpful suggestions based upon our experience, for prospective home buyers are as follows:

1. Ensure that you read and re-read documents, and thoroughly understand the entire process, and what you are signing

If you are unsure or uncomfortable, ask your lawyer, mortgage lender, or real estate representative for clarification or advice.

Start your planning early.

For example, ensure you understand the mortgage lenders approvals processes, sometimes ‘Pre-Qualified’ or ‘Pre-Approved’ doesn’t mean your lending institution has funds ready for you. Confirm the process with you mortgage lender, and when the funds would be available for you to make an ‘offer’.

2. Set your expectations accordingly

The mortgage process takes time, there are many ‘moving parts’ and stakeholders. Some of these processes can work at the same time, others, need to wait for the previous step or process to be completed. Sometimes steps can get delayed, which can impact the next step in the process.

Agreement of Purchase and Sale (APS)

One of the most important documents you will be signing will be the Agreement of Purchase and Sale (APS). You should become very comfortable in understanding the contents and the importance of this document.

The Agreement of Purchase and Sale is the written contract between the seller and the buyer. The specific details of the APS are the offer to purchase real estate property, land, and the purchase of a home.

The APS is referenced by the Ontario Real Estate Board (OREA). The APS includes the agreed upon price and the terms and conditions. This form contains page detail requirements and numerous number clauses and requirements.

To familiarize you with the APS, we have provided many of the items on the APS, detailed below:

The Agreement of Purchase and Sale includes:

- Buyers and Seller names
- Address and precise specifics of the property and it’s exact location
- The purchase price
- Deposit details
- Home value balance funds payment details
- Irrevocability date
- Completion Date
- Notices: Who is appointed and responsible for providing and receiving notices
- Chattels: What is ‘included’ with the property
- Fixtures which are excluded
- Rentals items and rental contracts. Equipment that is being rented, e.g., water heater
- HST obligations
- Title Search and Requisition Date
- Future use details, e.g., warranty
- Title, details including registered restrictions, charges, liens, encumbrances etc.
- Closing Arrangements, including lawyer APS completion details, location, funds exchange details etc.
- Documents and Discharge, title deed details
- Inspection, buyer inspection process and details
- Insurance, insurance responsibilities of the seller and the buyer
- Planning Act details
- Document Preparation, Transfer/Deed details
- Residency, residency/non-residency declarations
- Adjustments, any outstanding items, such as rents, mortgage interest, realty taxes details etc.
- Property Assessment details
- Time Limits details
- Tender, funds details, including dates and acceptable transfer types
- Family Law Act, includes spousal consent details
- UFFI, Urea Formaldehyde Foam Insulation declaration details
- Legal, Accounting and Environmental Advice, advice disclosure
- Consumer Reports, Buyer credit check
- Agreement in Writing. Buyer and Seller agreement fundamentals
- Time and date
- Successors and Assigns. Stakeholder signatures
- Spousal Consent, signatures
- Confirmation and Acceptance, signatures
- Information on Brokerage(s), Listing and Buyer
- Acknowledgement, signatures

3. Timeline Expectations – What to Expect in the Last Two Weeks Before Closing

Closing Day Timelines Vary and Fluctuate

A typical home purchase to closing process can take 30 – 45 days, more or less. Each situation is different and can be affected by the many different circumstances. There are many stakeholders involved with diverse responsibilities.

The Last Two Weeks Are the Most Active

There are many variables which can affect the entire timeline and duration. The last one to two weeks of that process are the most active and can require a great deal of your time and attention.

Real Estate Agent – APS Handoff to Your Lawyer

Once the Agreement of Purchase and Sale has been signed off and all conditions waived, and completed, and prior to closing, your real estate agent will send the copy of the signed APS to your lawyer who will begin the processes to complete the purchase.

Although the lawyer has received a copy, many home buyers have their lawyer read the APS in advance of its signing, which may help avoid disputes.

Understand Key Stakeholder Roles, Including Your Real Estate Agent and Your Lawyer’s Roles

When buying a property, you will want to meet with your lawyer to discuss their role, fees and how they can be of assistance to you.

During these discussions it would be worthwhile to discuss the services and searches available which of the lawyer’s services are appropriate for your purchase transaction.

Search of the Title of the Property

One of the primary functions of your lawyer’s responsibilities to you will be the ‘Search of the Title of the Property’ and ensure there are no prior claims.

The APS specifies that you will receive title to the property ‘free and clear’ of any claims, builder’s liens, easements, leases, judgments, previous mortgage declarations etc.

Your lawyer will review many documents, including:

Mortgage details, any outstanding mortgages on the property by the seller
Home/property insurance coverage
If a condominium, documents related disclosure statements, financial statements, bylaws
If applicable, the property survey certificate
Appliances, fixtures, and chattels included with the home purchase (APS)
Mortgage financials. Ensuring that adequate financing is available on the day of closing
Seller’s lawyer documents
Zoning bylaws compliance
If a new home, any warranties
Property taxes are up to date
No outstanding utility accounts balances
If applicable, the property survey certificate
Documents related to the condo, for example applicable bylaws, financial statements, disclosure statements, etc.

Be Patient

Some processes are aligned and are processed along the same timelines; however, many processes are sequential, or happen one after the other, which can take time as one stakeholder will be waiting for previous stakeholder work effort.

Be patient with your stakeholders. Your home purchase stakeholders are actively representing your interests.

Be Organized and Thorough

There are many factors which may help reduce timeframe prior to a home closing.

One of the factors is having a home buyer that is properly organized and prepared in advance of important milestones.

The home ‘closing’ can be a complex process, which includes:

Negotiation
Escrow Deposit
Title Search and Title Insurance
Home Inspection
Home walk throughs
Offer to Purchase preparation and submission (with your realtor)
Purchase agreement preparation and finalizing
Mortgage application completion
Mortgage lending institution home appraisal
Final mortgage loan approval
Offer to Purchase, including:
- purchase price
- deposit amount and particulars
- The Closing Date (the day you also take possession)
- Request for Land Survey of the property
- Conditions of offer, including financing approval, home inspection etc.
- extra items to be included such as appliances, windows coverings, fixtures etc.)
Agreement of Purchase and Sale acceptance signatures

Prepare for Closing Day Home Inspection

The Purpose of the Inspection

Closing day inspections are not an opportunity for additional negotiations.

Inspections are intended to ensure the home and its contents (fixtures and appliances) are aligned with the conditions of the sales agreement and that everything in the home is in working order.

Despite what the Agreement of Purchase and Sale may state regarding the number of visits you as the Buyer may be entitled to, the common-law provides for Buyers to conduct a final inspection of the property.

Our recommendation is to take advantage of such final inspection to ensure the condition of the property has remained unchanged.

In addition to a home inspector inspecting your home, you will need to thoroughly check the entire house and its contents the day of closing.

You should be preparing a checklist of every item and appliance which needs testing, including electrical, plumbing, gas, mechanical (e.g., garage door opener)

The day of closing is your only opportunity to ensure that everything in your home meets your APS expectations. After this day, any defects are the responsibility of the new homeowner.

Inspection Checklist

Having a pre-prepared checklist will help you stay focused and will help keep you from missing or overlooking something. A testing and verification checklist could include:

Light fixtures and switches
Faucets and taps. Running water, check under sinks for leaks. Check walls, ceilings, all floors for leaks or damage
Turning all appliances on and testing
Open and close all doors and closets, make sure they are working
Check and test all plumbing fixtures (toilets, showers, tubs, laundry room area etc.)
Open and close all windows and doors, including the garage door itself.
Check the attic
Check the entire outside of the property, any debris, garbage, or previous owner property

Additional Items to Consider

Contacting your utility accounts in advance of Closing Day is important. Contact them early in the process, to understand how much notice they need for transfer of the utility accounts. Do not leave this until the last minute.

Utilities to contact, include:

- Electric
- Gas (is the hot water heater rented or owned?)
- Cable and internet
- Phone
- Alarm
- Insurance
- Moving company
- Others

4. It’s Closing Day, What Can We Expect?

Closing day, or completion day, is one of the final steps in the home purchase journey. You haven’t received the keys to your new home; however, you are very close to it.

Your lawyer will have some work left to do, however you should have the keys to your new home no later than 6:00 p.m. on the day of closing.

Here are some practical steps to prepare you for your home on your Closing Date:

Moving out, what appliances, fixtures, furniture etc. will you moving with you and what will you need?
Unlocking your new home… but first things first. Before moving anything into your property on Closing Day, you will need to do a thorough final walk-through and inspection
Check for damage or missing items. If appliances, fixtures, or other items were included, are they there? Do they work? Check all the electrical outlets, open and close all the windows, check the plumbing, look for any leaks, especially in the basement and on ceilings. Is everything operational and as they should be based upon the Agreement of Purchase and Sale.
Once you have your walkthrough and inspection, prior to moving in, you may want to consider having the home completely, cleaned, carpets shampooed, windows cleaned, fireplace checked and cleaned etc.
Prior to moving in, this may be a good time to do any painting or home improvements, while the house is empty. Having your home professionally cleaned, prior to moving in and after any renovations, should be scheduled in advance of moving your valuables into the home,
Although a pool check should have been performed during inspection, check around the home and on the outside, for any damage or issues. If there is a pool, ensure that it is in running order, especially the pump, chlorinators, filters, heaters, skimmers etc. Check for leaks.

This is what to expect on closing day.

- Provided that you have signed the necessary paperwork and documentation with your lending institution; on closing day your mortgage lending institution and your lawyer will be coordinating the transfer of funds to the buyer’s lawyer, and other home title and deed transfer duties. Your real estate agent may be contacted, if necessary
- Once the funds have been transferred, your lawyer will register the home purchase at the Land Title Office, and you will be listed as the new owner of the property
- This usually requires the whole closing day, your home keys (don’t forget to prepare to change all the locks) are usually released sometime in the afternoon, by no later than 6:00 pm. Lately, practices have involved leaving keys at the property in a lockbox, to reduce the travel time for buyers, so that they may head directly to the property once the transaction closes;
- Your lawyer will also ensure that there are no last-minute claims on the property, release funds that have been held in their ‘trust account’, pay out adjustments as outlined in the APS ‘statement of adjustments’, including commissions, sales tax, and land transfer tax
- Once the property is closed, and in addition to ensuring that the Sellers obligations are satisfied, your lawyer will provide appropriate documentation including a ‘Reporting Letter’, and an account of their applicable activities and fees related to the transaction

5. ‘Are Appliances Included? Not So Fast. Don’t Make Assumptions.’

The most common of issues which come up with home purchases are misaligned expectations, misunderstandings and disappointments related to appliances.

Work With Your Real Estate Agent About Your Appliance Expectations

There are limited opportunities to ensure that your expectations are satisfied when it comes to appliances. Your real estate agent can ensure that your expectations are included and clearly outlined in the Agreement of Purchase and Sale.

Appliance Inspection

Unless agreed upon between the seller and buyer, appliance inspection (and testing) is not usually performed during ‘walk-throughs’.

Appliance inspection could be included on home inspection. Ensure that they are the same appliances models and match your previous expectations and are in working order on the day of closing.

Appliance Functionality

Appliance inclusion is one thing; however, the condition and functionality of the appliances should be detailed.

Your home inspector can include the appliances when they inspect the property. With your instruction and direction, they can test the appliances to ensure they are working the day of the inspection, however you as the homeowner will need to immediately validate all the appliances themselves and test them yourself again on Closing Day.

Closing Day Testing

On Closing Day, walk through your entire home, test everything.

Turn all the lights on and off, flush all the toilets, turn on faucets, etc., put the dishwasher on, the clothes washer, the dryer, the air conditioner, and other appliances.

If your new home has a pool, check the filter, pump, heater etc.

Unless otherwise provided for in the Agreement, the appliances are only required to be in working order up to the end of the Closing Day. As of 12:01 am the day after Closing, if an issue occurs with the appliances, then as the buyer, such issue will be yours to deal with.

Appliances – Set Your Expectations Accordingly

Appliances breaking down on or before the Closing Date is an unfortunately common issue.

It also happens to be an issue that is difficult to resolve after closing. Once you as the buyer spend your money and purchase your new property, trying to get a seller to reimburse you for a minor repair/fix of an appliance is very difficult.

Notwithstanding that your agreement may provide for the appliances to be working as of closing, unless an issue is identified before closing, the seller may not feel “compelled” to compensate the buyer for the cost of the repair.

Reading and understanding documents is critical. Being clear about the home inclusion details is important and should be shared with your realtor representative.

The buyer’s real estate representative is a critical part of these details, ensure that the APS details meet with your expectations.

There also may be appliances you don’t want (unwanted lighting, electrical boxes, receptacles etc., which when removed, may cause damage upon removal, these damages should be fixed prior to possession and part of the inspection.

It is important for the home buyer to ensure that their real estate agent understands the buyer’s expectations regarding appliances included with the home purchase and the condition of the appliances and fixtures

Appliances and fixtures can include:

Refrigerator
Range/stove
Dishwasher
Washer and Dryer
Water Heater
Furnace
Air Conditioner
Water softener
Air cleaners and purifiers
Alarm system
Pool appliances, including heaters, filters, chlorinators, and other pool accessories

These items need to be clearly detailed in the offer. What are the appliance and fixture expectations from the home seller, has it been defined prior?

6. The Deal Fell Through. What Happens to the Deposit?

As mentioned in our section ‘Terms and Key Documents To Know Before You Get Started’ in our ‘Introduction’, a broker, realtor, or agent may claim their commission, even though the sale didn’t close. This could also be applied to any deposits currently held by your realtor’s brokerage. As we mentioned in the previous section, this would be very rare and uncommon. We’ve provided two relevant articles in our Sources and Links at the end of this post. As with most legal agreements, it may be a good idea to have a lawyer review legal documents with you prior to signing.

The home purchase transaction required a deposit. The deal was defaulted, reneged, or terminated some way by the buyer, so what happens to the deposit?

Seller and Buyer Rights

Is the seller entitled to the deposit outright? Does the home seller need to sue the buyer to recover the deposit? Does the home seller attempt to negotiate with the buyer who terminated or reneged on the deal over releasing all or part of the deposit? We’ll provide some possible answers to those questions.

Deposit Location

When a seller has signed a listing agreement with a Real Estate Broker, the buyer’s deposit will be paid into the seller’s Real Estate Broker’s Trust Account. Following which, the deposit can only be transferred out of the Real Estate Broker’s Trust Account, in one of the following situations:

1. The purchase/sale is completed.

2. The buyer and seller both provide unanimous direction to the Real Estate Broker specifying as to whom the deposit is to be paid; or

3. A Court orders that the deposit be paid to one or both of the parties.

The same principles apply in situations of a private purchase where the deposit has been paid to the seller’s lawyer, in Trust.

OREA Form

Nearly all real estate agreements are completed on an OREA (Ontario Real Estate Association) form of agreement of purchase and sale, so we will begin there.

Every OREA form has the following section pertaining to the buyer’s deposit:

“[The] buyer submits ($xx,xxx.xx), upon acceptance by negotiable cheque payable to [the] “deposit Holder” to be held in trust pending completion or other termination of this Agreement and to be credited towards the Purchase Price on Completion.”

None of the other provisions in the standard OREA form address the situation of what happens to a buyer’s deposit if he or she is unable or unwilling to complete the purchase.

If the two parties wish, they may insert an additional provision into a schedule to the agreement, setting out the terms confirming to whom the deposit is to be paid upon the buyer defaulting on the purchase.

Such provisions are typically rejected by buyers, as they do not want to risk suffering an immediate loss of their deposit, when the reason for their failure to complete the transaction, may be in dispute.

Deposit Outcomes

However, the law supports the seller being entitled to the deposit, in the event of a buyer defaulting under the agreement of purchase and sale and being unable to complete the purchase, (save and except what the contract may state or some rare exceptions).

Despite this deceptively simple answer, how and when a seller can get possession of the deposit, is a separate question altogether.

Unless both the seller and buyer can agree to what is to happen with the deposit in the event of the buyer defaulting, the Real Estate Broker/lawyer is typically restricted from releasing the deposit to the seller.

Court Orders

Where the parties are unable to come to an agreement with respect to what is to happen with the deposit, a Court Action must be started, and a Court order obtained, to determine who is entitled to the deposit.

At this point, each party will be burdened with proving why the deposit should be released to them, as opposed to the other party. However, unless the buyer can show that the failure to release the deposit to them would result in an unconscionable loss to the buyer, the seller will most often, be awarded the deposit.

Take-away points

You as the reader should take away the following points from this specific part of this post:

The starting position as it relates to entitlement to the deposit is: if a buyer breaches the agreement of purchase and sale, the seller is entitled to the deposit.
Where a buyer is unable to complete a purchase, and the parties cannot agree on what is to happen with deposit, then the deposit shall remain in the Real Estate Broker’s/lawyer’s Trust Account, pending a settlement agreement between the parties or a Court Order.
Where a buyer is unable to complete the transaction, the seller is required to mitigate his or her damages by attempting to resell the property.
Where the seller resells his or her property for less than the originally agreed to purchase price, the seller likely has a claim for the deposit, plus the loss suffered because of reselling the property at a less amount and any additional carrying costs.

Conclusion

Congratulations! You’ve made it to the end of this article.

Whether you have recently purchased or sold a home and are embarking on another home sale or purchase, or perhaps you haven’t purchased a home in a while, or if this is your first home purchase, we hope this article was of interest to you and that we have provided some level of value.

We’ve included a couple of our previous posts which may also be of interest to you.

You’ve Decided To Buy: 9 Insights To Help the First Time Home Buyer

Your First Home: Is Buying a Home the Right Decision for You?

If you would like additional information about Nichols Law, please visit our website.

Disclaimer

Sources and links are provided for source credit and attribution, and for additional information purposes only. Nichols Law is not affiliated, associated, authorized, endorsing/endorsed by, or in any way officially connected with any of the sources or links provided.

Sources and Additional Information:

The Globe and Mail; Seller beware: Even if the deal dies, the agent may still want their commission

CBC; Real estate agencies can collect their fee even if a buyer defaults on a sale, B.C. man learns

Toronto Star: When you’ve got the keys to your new home but the sellers haven’t left

Global News: Home inspections aren’t always an option. Here’s how buyers can protect themselves

ZOLO: Every Task a First-Time Homeowner Needs on Their Possession Day Checklist

Canadian Real Estate Wealth: How long does it take to buy a home in Canada?

REMAX: Ontario Real Estate Association (OREA) Form 100, The Agreement of Purchase and Sale (example)

The Brel Team, The Real Estate Lawyer’s Job: After the Contract Is Signed

WOWA: What Is An Agreement of Purchase and Sale?

Ottawa Sun: Agreement of Purchase and Sale explained

Sun Life: Buying a house: What happens after your offer is accepted?

CMHC: Buying Your First Home in Canada; What Newcomers Need to Know

Ontario Council of Agencies Serving Immigrants (OCASI): Should I sign a Buyer Representation Agreement with a real estate agent?

CMHC: Finance your home.Mortgage basics, pre-approval, loan insurance and tips for meeting with your lender or broker

OREA Listing Agreement: Form 200 Fully Explained

The Brel Team, The Financing Condition: What You Need To Know

CMHC: Home buying step by step

The Real Estate Council of Ontario (RECO): If I buy a house, how do I know if the appliances are included?

Bridgewell Real Estate Group: What Happens on Closing Day When Buying a House?

Paradise Developments: What Happens on a Closing Day in Ontario? (2021)

CIBC: How to avoid closing day problems

Mortgage InGenuity Inc.: First Time Home Buyers Guide: What about Pre-Qualification, Pre-Approval, and Mortgage Commitment Letters?

The BRELteam: Selling the House You Bought Last Year

Mortgage InGenuity Inc.: Your House-Closing Timeline: A Step-By-Step Guide

Remax: 10-Step Guide to Selling Your Home

Canadian Real Estate Wealth: How soon can you sell a house after buying it in Ontario?

The Real Estate Council of Ontario (RECO): Buyer Representation Agreements: Understanding the Fine-Print

CIBC, How To Avoid Closing Day Problems

The Balance, Tips for Doing the Final Walkthrough Before Closing on a Home

Nested Sage Real Estate, Why You Should Take Advantage of Your Buyer Visits

You’ve Decided To Buy: 9 Insights To Help the First Time Home Buyer

Posted on October 8, 2021

You’ve Decided To Buy: 9 Insights To Help the First Time Home Buyer

Introduction

As detailed in our previous post “Your First Home: Is Buying a Home the Right Decision for You?” the affordability aspect of purchasing your home may be the first step for your first-time home purchase journey.

It goes without saying that everyone’s first home buying experience and situation is different. However, there are additional first-time home buying exercises beyond affordability that are worth exploring and researching. These additional exercises and thought processes can be related to your own specific knowledge, comfort level, lifestyle fit, geography and neighbourhood preferences, just to name a few.

In addition to having a thorough understanding of your own motivations, mindset, and objectives, you may need to depend on and trust external resources.

Trusting External Resources – First Time Home Purchase

External resources and professionals such as financial and lending institutions, realtors, real estate lawyers, your insurance broker, home inspectors will need to be part of your process. You may want to start asking friends,
colleagues, and family now for referrals for these resources, if possible.

When you have eventually selected your external resources, it may also be beneficial to share your first-home purchase vision, plans, requirements, lifestyle etc. (including the outcome of this post insights) with these external resources. Let them know about other relevant, important, and pertinent background information and any other insights that are specific and important to you.

Over the next few pages, we will try to highlight the possible steps and processes that you may encounter once you have decided that a ‘first-time’ home purchase is affordable and the right fit for you.

Let’s get started.

Home Selection Process

Once you understand the affordability part, one of the next steps is the type of home you may want to live in.

The home selection process essentially comes down to personal tastes, needs and requirements, geographical and environmental preferences to name a few. However, there are a few insights we can share to help you get started with the type of home you may want to consider.

First Time Home Purchase – Home Selection Insights

A simple first home purchase research exercise of driving or walking around different neighborhoods, may be beneficial.

Look at different styles of homes, floor plans, locations, for example:

Condo
Single Family (Detached)
Two Storey (accessibility concerns, stairs, more privacy)
Bungalow (accessibility friendly, limited or no stairs)
Townhouse
Cape Cod
Farmhouse
Colonial
Contemporary
Cottage
French Country
Mediterranean
Ranch
Split-Level
Tudor
Victorian

First Home - At the end of a residential road, a circular court with beautiful homes, with clean yards and lawns, at dusk

What size of home do you need or want? Square footage, # of bedrooms, bathrooms, guest quarters, extended family needs, garage etc.?

The size of the lot the home is situated on (how much land do you need?).
Give some consideration to the location of the home and the lot:
Big lot or small lot (lots of room to play and entertain, space for a new pool, lots of maintenance, lawn mowing, leaves in the fall),
Busy street (accessible, noisy, traffic)
Street corner (people cutting across your lawn?)
Ravine (airy, spacious, wildlife)
Lots of trees and tree canopy (shade, green factor, cool in summer, lots of leaves to rake)
The type of neighborhoods. Research the neighborhood, is the neighborhood community oriented, looking out for one another or do they keep to themselves and keep neighbor engagement and communication to a minimum
Would you prefer your neighbour’s home be within a couple meters or do you prefer homes be much further away, or a ‘gated community’ perhaps?
Proximity to schools, malls, grocery stores and other amenities
Location on a street, crescent, or court

Home Style Selection Next Steps

It may be beneficial to collect all the relevant data specific to your situation into an expanded ‘first draft’ list of your needs and wants. Once you have that initial list, you may want to prioritize, refine, and shorten the list based upon what your primary needs and preferences are.

Having this list of insights, detailed primary needs and preferences will be helpful with your own decision process about the purchase price, type of home, location, style etc. This exercise will also help you by setting ‘budget and personal fit’ boundaries to work with regarding what you are looking for in a new home.

These preliminary effort, proactive analysis and initial needs process will benefit your first-home purchase process by having many of the answers prepared in advance to the many questions that your external resources will be asking.

Sharing this type of information with your real estate professional can help them improve their sort and search results for the home (and location) that will appeal the most to you.

External Resources – Professionals, Experts and Specialists

For the most part you will be on this first time home purchase journey on your own. Most of the preference and decision making will all be ‘internal’ to you and you alone. However, there will be ‘external resources’ that you will need to assist you, those who you will need to depend on and trust throughout your entire first home purchase journey and process.

You need to contact experts and specialists to help you along your first home purchase journey.

These experts and specialists include:

Mortgage Specialist
Realtor/Real Estate Agent/Broker
Real Estate Lawyer
Home Inspector
Home Property Insurance Agent
Life Insurance Agent

Ask Your Personal and Work Network

One of the best sources for these external resources is from asking your network for referrals.

Your colleagues, family, neighbors, people you know well, and friends are a valuable resource for these referrals. In addition to getting these referrals contact information, ask your source why they like this ‘expert or specialist’ and prefer them to others.

Once you have collected numerous names for the resources shared with you will need to do some background research on them to ensure they are a fit for you.

If a referral is from someone you know, like and trust, it’s likely that they may be a fit for you and your needs, however you should still do your homework, visit their website, call (or video call) the on the phone and if possible, meet with them before making (or signing) and commitments.

Your first home purchase will include legal contracts and related complexities. You should be contacting a lawyer as early as possible, and before signing any documents, which we will detail in the Real Estate Lawyer section.

You and Your Mortgage Specialist

Your mortgage specialist should be one of the first resources you talk to once you have decided to purchase a new home. They will most likely be a part of your ‘affordability’ process and discussions.

Your mortgage specialist should be able to lay out different mortgage options and alternatives.

If you’re not familiar with mortgages, you should be knowledgeable in advance of meeting with your mortgage specialist. We’ve included a list of terms which you may want to research. Your Mortgage Specialist should also be educating you on the different mortgage processes and terminology, such as:

Credit score. Information to income and debt requirements, along with formal proof and documentation
Mortgage Application process
Mortgage Pre-Approval (certificate)
Home value and appraisals
Home inspection
Mortgage (default) insurance
Borrower qualification and financial Stress Tests
Home property and contents insurance requirements
Mortgage financing specific terminology, including:
- down payment
- amortization
- mortgage term
- interest rate
- fixed rate vs. variable rate mortgages
- appraised value
- Gross Debt Service Ratio (GDSR) and Debt to service ratio
- High ratio and low ratio mortgages
- Lump sum payment
- Interest adjustment
- Closed mortgage
- Open mortgage
- Conventional mortgage
- Convertible mortgage
- Equity
- Default
- Mortgage Life Insurance (vs. the benefits of separate life insurance)
- Penalties
- Mortgage renewal
Land transfer tax
Property survey
Closing costs

Home Ownership - Female asian mortgage specialist shaking hands with future first time home buyer

You and Your Realtor/Real Estate Agent/Broker

Now that you have an idea about the size of your home and the type of home you want, you may want to do some research about the home’s location. An experienced and knowledgeable real estate professional can be of assistance with this exercise as well.

Before contacting a realtor, brokerage or real estate agent, research your preferences on a search engine, Google for example. Visit Realtor websites and look at various homes, locations and maybe drive or walk around different locations and neighborhoods.

Become an expert in your own needs and wants and share that information and those insights with your agent.

Understand the difference between a Realtor, Real Estate Broker, and a Real Estate agent

A Realtor belongs to the Canadian Real Estate Association (CREA). A Realtor may have more professionalism, ethics, training, and experience. Realtors must continuously abide by CREA training, membership, ethics, and code of conduct.

Real Estate Brokers have additional training and licensing which allows them to hire other real estate agents to work for them. They must be a licensed Real Estate agent for two years before beginning the additional licensing, training, and courses.

Real Estate Agent is licensed (courses and pass exams) to help people buy, rent, and sell real estate, but doesn’t belong to CREA (unless they are a CREA member, then they would be a Realtor). A Real Estate agent must work for a real estate broker (all deals must go through a brokerage that operates a trust account).

Being knowledgeable about your own needs and wants will help your real estate resource help you. They will gather necessary market and neighborhoods intelligence to help you on your first-time home buying journey. Your real estate professional should be proactively reviewing the types of homes and neighborhoods you want to visit and eventually, and if appropriate, home viewings and walk-throughs.

Do your homework, it would be helpful to know (and share) your preferences for:

Affordability and budget
Geography and location (What city, suburb etc.)
Home style, floor plan etc. preferences. Lots size, maintenance comfort level
Neighbor type preferences (how close do you want your neighbors? What type of neighbors?
Lifestyle (single, couple planning a family or not)
Type of amenities or access you want to be close to (boutiques, shopping malls, transit, highways)
Accessibility requirements
Other ?

When you share this type of information and insights with your real estate representative, they can use that information through their own real estate ‘lens’ which will help them help you with your selection process.

Be patient with all your external resources, especially your real estate resource. After sharing your preferences with them, they may also show you homes outside of the parameters you requested. They may just be trying to offer you information or alternatives that you may not be aware of, and they may also be trying to understand your boundaries, decision making process and preference levels.

Sometimes the dream homes people eventually end up buying were outside of the information, preferences or details provided to the real estate agent. Be transparent and let them know if this approach is helpful or not.

You and Your Real Estate Lawyer

Once you have decided and confirmed that you can afford a new home, have discussed mortgage details and alternatives with a mortgage specialist, and have initiated the home purchase market activities with your real estate representative, you should be contacting a real estate lawyer that you are comfortable working with, this includes their staff as well.

Your real estate lawyer will be fulfilling a critical role with your first-home purchase, so your real estate lawyer should be involved as early as possible.

Agreement of Purchase

An Agreement of Purchase and Sale can deal with numerous issues and can be complex. Being proactive and transparent with your real estate lawyer is very important, in advance of signing any home purchase documents. You may wish to share the Agreement of Purchase and Sale with your lawyer, before signing. This can help avoid any disputes and lower your costs, if there are any disputes.

The role of your real estate lawyer will include:

Initial introductions, including understanding your needs
Working with your mortgage lender or specialist to make sure your financing is received
Review of mortgage related agreements and documents, ensure you are aware of your legal rights and any obligations
Taking all the necessary steps to ensure your first home purchase is successfully completed
Advising you about including any conditions on the home purchase that can give you flexibility if you wish to withdraw from the deal. These conditions could include that the sale is subject to a home inspection, financing or review and approval from your lawyer. These conditions could be helpful if there is something wrong with the property and you want to withdraw from the deal
Review of the builder’s purchase agreement if you are buying a newly built home. Ensure that the builder’s purchase agreement is fair to both parties
Review of the lot survey and deed to ensure there are no encroachment issues
Reviewing the Agreement of Purchase and Sale from your real estate representative, ensuring the document is clear, complete, concise, and effective
If buying a condo, review of condo status certificates, and ensure that the condominium corporation is financially sound and stable. Examine any condo rules, regulations or provisions which would not be in your favor
Complete property title searches. Your lawyer must ensure that your home and its title are free from any liens or other burdens or impediments
Ensuring that that property taxes, utilities, are up to date. If any utility bills or taxes have been pre-paid by the previous owner, you will need to re-imburse these funds to the seller as part of closing, your lawyer will oversee this reimbursement as part of the overall transaction
Arranging title insurance
Home purchase ‘searches’ availability and discussion
Building and zoning searches
New home warranty or resale home warranty awareness and review
Ensuring that any mortgages or lines of credit registered against the home’s property title are discharged and paid-out
Property fees collections, down payments, taxes, and disbursements paid out related to the property purchase or sale
Mortgage modifications (if required)
If a private sale, provide transaction advice, negotiation of terms, preparing a sale or purchase agreement
Preparation of closing documents
Your lawyer will:
- Let you know about your closing costs in advance
- Also process the mortgage funds from your lender
- Deposit those funds in a trust while the deal closes
- Discuss any other closing costs with you, including their fees and disbursements, and applicable title insurance

You and Your Home Inspector

Hiring a home inspector can help save you a lot of headaches and potentially save you a great deal of money.

How else would you know if the home you about to purchase has a leaking roof or basement, or the windows and home are in poor shape in need of an upgrade?

If the previous owner hasn’t been properly maintaining the structural integrity of the home and the home has serious structural issues, then you may have many costly issues with the home going forward. This would not be a good experience for the ‘first-time’ homeowner.

A home inspection prior to buying a home can identify significant issues with the property you are thinking about buying. These issues would need to be repaired to your satisfaction or you may want to back out of the home purchase deal altogether. Having a home inspection can help you avoid these types of issues.

Home Inspectors Are Not Regulated

The home inspection sector is not government regulated, so anyone who wants to can call themselves a ‘home inspector’. Perhaps asking your friends and family, a Realtor, broker, or real estate professional for a referral may provide the best inspector for your needs.

Most credible home inspectors will have extensive background in home construction, along with expertise related to environmental or chemical sector. They often have civil engineering experience with diplomas or degrees, along with home inspection certification and training from inspection associations and colleges.

You should keep in mind that a home inspection will identify only observable issues with the property. That is, issues which can be discovered by walking around and looking at the interior and exterior of the property. Issues that are hidden behind walls or buried in the ground, are likely to be missed by even the most experienced inspectors. This is why it is important to include warranties into the Agreement of Purchase and Sale, that protect you as the buyer, from any hidden defects that an inspection may miss.

You and Your Home Property Insurance Agent

The primary objective of home property insurance is to protect your home, its structure and most of its contents in the event of loss or damages such as a burglary, fire, or a storm.

Home property insurance ‘may’ also protect you when you are away from your home as well. It’s best to check with your home insurance provider, about coverage specific to your needs.

Home property insurance can also cover your personal belongings, including your furniture, appliances and living expenses should a loss or damage event arise.

If you have expensive items, you may need additional coverage also known as ‘endorsements or riders’.

The Importance of Maintaining Your Home

Home property insurance will not cover neglect, so keep your home’s infrastructure up to date, including:

Roof
Windows and doors
Heating and air conditioning
Basement (leaks)
Pool
Other ?

Another component of home property insurance is personal liability. Home property insurance usually covers people who may be injured on your property or in your home, liability limits vary.

Different types of homes and dwellings need different types of home insurance coverage:

House
Condo
Rental

At some point in your first-home purchase process you will be asked for some type of proof of insurance. Home property insurance is a critical component of a home purchase and is required for one or more of your external resource’s stakeholders, especially your financial institution who is lending you the funds for the home. In fact, most financial institutions and lenders will not release mortgage funds until you have provided proof of proper and adequate insurance for your new home, to your lawyer.

Be Thorough With Your Property Insurance Research and Selection

Selecting property insurance is not a detail you want to leave for the last minute. Property insurance should also be included in your affordability and budgeting process.

Researching and selecting property insurance should be near the top of your list once you have decided to make your first-home purchase.

Much of the planning and organization details we are discussing in this document will be helpful to have when speaking with a property insurance agent, they may ask many questions, including:

Type of insurance needed. Home, condo, or rental (tenant)
Home address and homeowner(s). Whose name is on the deed.
You may be asked your age, gender, marital status, dependent children, and ages of people living at the home
Occupation
Type of dwelling and square footage
Garage
Plumping type
Wiring type
Exterior materials (brick, stone, siding etc.)
Coverage start date
When was the home built?
Finished basement
Operate a business from home
Rent any part of the home or property
Provide a list of expensive items, such as bikes, watercraft, artwork, jewelry, wine, or spirits, other
Home alarm, covering water, fire, or theft
Claims history
Contact details, such as phone number, email, and addresses
Alumni (preferred rates)

Home Ownership - Man with magnifying glass scrutinizing a contract with his index finger

When to Buy Home Property Insurance

If you are in the process of bidding or making an offer on a home, if you haven’t already, be proactive and contact your preferred home property insurance company about your first-home purchase plans and activities.

Once you have a bid on a home and have a ‘close and move-in’ date, you will need insurance when you assume ownership.

Life Insurance Agent – Mortgage Protection Insurance

At some point during your mortgage discussions, you will be asked about ‘optional’ life insurance for your mortgage also known as mortgage protection insurance. You can purchase this type of insurance through your financial institution, or you can purchase it separately.

Ultimately, the decision is yours to make regarding the type of insurance you need, we will try to outline a selection of pros and cons, and alternatives.

Not to be confused with mortgage default insurance (less than 20% down payment), like the type we detailed in “Your First Home: Is Buying a Home the Right Decision for You?” that is available from CMHC.

Mortgage protection insurance covers you if you die or become disabled. Some financial institutions offer a ‘death only’ component. The premiums are added to your mortgage payment.

Advantages and Disadvantages

There are advantages (convenience) and disadvantages (cost and eligibility when you need it) of purchasing from your financial institution.

You have a few options and questions to think about:

Do I need life insurance for the new home’s value? What liabilities do I have should I die or become disabled?
Do I already have life insurance separately that already covers the house value? Can I increase that coverage with my current life insurance broker?
Is the cost of adding insurance coverage from the financial institution greater than purchasing life insurance separately from an agent? Mortgage insurance purchased from a financial institution shrinks as your mortgage decreases, yet the premium often stays the same, is this good value?
Can I purchase life insurance from an agent or be refused insurance? Is the life insurance being offered only available from the financial institution?
Will the financial institution honor the coverage? Insurance from financial institutions is often provided without a medical examination requirement, yet when a claim is made the coverage may find an issue or violation of the insurance and leave you exposed with no insurance when you need it.
When you purchase life insurance through your financial institution and you renew your mortgage, the premiums could go up.
If a claim is made from a financial institution’s life insurance, the bank or financial institution usually receives the insurance funds directly, those insurance funds do not go to the homeowner. From a financial planning perspective, this may or may not be the best option at the time for your beneficiaries.

If you need additional life insurance coverage for your home value, speak to a financial planner. Or speak to a qualified and knowledgeable life insurance agent and provide your situation and particulars. There may be some longer-term advantages and benefits to purchasing your own life insurance on your own.

Decision Making – Making an Offer and Closing Date Activities

At this point in your first-home purchase journey, you have decided you can afford a home, have performed all the activities leading to the selection of the home you desire, and now you and your real estate representative are ready to make an offer to buyer or their real estate representative.

This is your first home purchase, so you’re going to be exposed to many new terms, complexities, acronyms, processes, and information that will be foreign to you.

Talk to a Lawyer Sooner Than Later

When it comes to signing any contracts, agreements, or documentation, it would be prudent and best advised to talk to your lawyer prior to engaging in any signing of documents. At least initially, and even for the more harmless looking documents that your real estate representative will ask you to sign before you begin your first home purchase journey.

Inform your lawyer or legal representative that this is your first home purchase. They should guide you through the process, and let you know which documents you will need their help with and when. There may be documents that appear harmless to sign, however having a discussion with your real estate lawyer beforehand will give you some peace of mind for your first-time home purchase transactions.

There is only one legal expert who is qualified from a legal perspective, that is your lawyer. That doesn’t mean that real estate representatives are not familiar or have knowledge about the Agreement of Purchase and Sale, however they are not experts on the legal conditions, clauses, or their ramifications, to name a few reasons.

When you hire a lawyer to assist you with the purchase of real estate, the lawyer should perform a number of searches to ensure that the possibility of problems with the real estate is minimized. You, as a buyer, should discuss with your lawyer what searches are available to you and which are appropriate for your purchase transaction.

Get Comfortable With Paperwork and Contracts

There are many documents and paperwork involved with buying or selling a home in Ontario.

Most agreements to buy and sell real estate are created on pre-printed forms which have been created by the real estate industry or by lawyers.

These documents may include:

Agreement of Purchase and Sale
Agreement of Purchase and Sale Condominium
Buyer Representation Agreement
Buyer Customer Service Agreement
Confirmation of Cooperation and Representation
Listing Agreement – Authority To Offer for Sale
Seller Customer Service Agreement

Warranties

Some properties are bought as new homes, and some are bought as resale homes. New home

purchases are covered by Ontario’s Tarion Warranty. Resale homes are not covered by any warranty other than what is given by the seller and agreed to in the Agreement of Purchase and Sale.

It is therefore imperative that buyers negotiate for warranties to be given by Sellers to protect themselves from any issues which arise after closing.

The Sales Agreement Process

Not sure how the home purchase process work? The primary document at this point would be the Agreement of Purchase and Sale (Agreement). Every home purchase is different; however, this is a typical home purchase sale process:

The first-home buyer will have their real estate representative assisting them with the finding, locating, and selecting the home they wish to purchase. They will also be involved in negotiating the first-home purchase.
The Buyer’s agent will prepare an offer to purchase and submit it to the Seller or his or her representative.
Once both parties have executed the Agreement, the signed agreement is then sent to a lawyer who is requested to complete the purchase.
Once signed by both parties, an agreement of purchase and sale cannot be amended without the consent of all parties.
Once the Agreement is signed, the final closing processes begin. All legal documents must be signed, and all payments must be paid out. In most cases, once all the closing details and transactions are completed, you will receive the keys to your first home before the end of the closing day. However, there could be factors that impact whether you get your keys at the end of closing day, these factors include mortgage funding, courier delivery of keys, online registrations completed.

Picking Up the Keys to Your New Home

Once you have picked up your keys, you can start the process of moving in, or in some cases some first-time home buyers take some time to do some renovations, painting, cleaning, upgrades before they move in, providing they have a place to stay.

Conclusion – Next Steps

Congratulations! You’ve made it to the end of this article, and perhaps you’ve already started your first-home purchase journey.

In our previous first-home purchase post “Your First Home: Is Buying a Home the Right Decision for You?” we provided insightful details about the most important part of your first-home purchase process, Affordability. You will learn about the critical next steps once you have decided that you can afford your first home.

In addition, if you’d like to read more about purchasing your first home, we have linked several articles below discussing similar topics. In addition, please visit our Real Estate Law and Buying A Property sections on the Nichols Law Professional Corporation website.

Sources and Additional Information

Disclaimer

Your First Home: Is Buying a Home the Right Decision for You?

Posted on October 8, 2021

Your First Home: Is Buying a Home the Right Decision for You?

Introduction

A home purchase is most likely the largest financial decision a person, couple or family will make in their lifetime.

A home has an important purpose, it provides you with shelter. In addition to shelter, your home can be a place to rest and relax, provide opportunities to entertain your family and friends, and perhaps raise your own family.

There could be numerous reasons why purchasing a new home could compel you to venture into the real estate market. If you’re renting, you may have driven or walked past a ‘dream’ home that was for sale and wondered “what if”? Perhaps a home of a friend or acquaintance came up for sale, a home you could see yourself living in, which compelled you to look at or visit the home’s ‘open house’.

Can I Really Afford To Purchase a New Home

Regardless of the reason for looking at first time home possibilities, at some point during your ‘thinking about it’ home purchase exercise, you ask yourself “Can I really afford to purchase a new home”

The primary information within this post is intended to guide the first-time home buyer who is thinking about buying their first home and is comparing home ownership with renting. The first-time homeowner may need answers about whether they can afford to purchase their first home or not.

Although this post is written for first-time home buyers, there may be insights within the post which may help some buyers who have previously purchased a home.

Let’s get started.

Taking Your First Home Buying Steps

Deciding to finally purchase your first home can be somewhat overwhelming. Where exactly do you start?

Before you get started with your ‘First Time Home Purchase’ research on Google and visiting realtor websites, take some time and reflect about whether buying your first home is the right decision for you. The answer to this question is based primarily on an individual or family’s financial resources and whether buying vs. renting is a better investment or decision.

Affordability

Most prospective homeowners start with affordability, which we will expand upon in the following pages. Do you have the financial means to save enough for a down payment, pay realtor and legal fees, and sustain the ongoing costs of owning a home?

Most first home buyers start with comparing the costs of owning a home vs. renting. In addition to a mortgage payment, home ownership costs also include many other factors such as on-going municipal taxes, home insurance, maintenance and upkeep, furnishings, day-to-day items, among others. In most cases, renters don’t have to worry about most, if not, all of these ownership related costs.

These home ownership costs and financial responsibilities should be ‘top-of-mind’ when you are deciding whether you should continue to rent or purchase your first home.

Home Ownership Vs. Renting

We’ll be going into a bit more detail in the next section, however it’s critical that you reflect on your own situation and whether home ownership is a fit for you. Perhaps you’re better off renting and continue building a first home down payment nest egg or investing elsewhere?

Home Ownership Investment Advantages

From an investment perspective, home ownership may have an advantage over renting, although your specific situation may differ.

On average, the Toronto real estate market has increased 5% year-over-year, for the last 50 years. This type of growth can fluctuate and vary, meaning there are peaks and valleys and highs and lows. While this growth has

been the average, there are never any certainties. With the understanding that home ownership will likely cost more than renting, you may wish to compare whether you are able to save/earn on investments, at an equal to or better rate, than the average increase in home prices. You may be surprised by the comparison.

If you are purchasing your first home strictly for investment purposes, perhaps having a discussion with a financial planner may be beneficial. There may be other investment alternatives that may be best suited for you from a strictly investment perspective, depending on whether the investment is short-term or long-term based.

Home Ownership Responsibilities

Home ownership has many responsibilities, including the on-going repair and upkeep of your home and its structure.

Structural repairs such as plumbing, electrical, heating and air conditioning and the roof for example, are critical home components which need to be kept in working order and functional. These repairs need to be performed by qualified and or licensed professionals.

If you’re not sure about a repair, call a qualified professional first. Most maintenance, and minor home repairs like painting or cosmetic changes, or lawn mowing for example don’t necessarily need a qualified or licensed expert. Many homeowners do the simple stuff on their own, with varying levels of quality and success.

If you’re not familiar or comfortable with minor home repairs, your maintenance costs may be higher if you have someone else do it.

In most cases, working on your own home, such as gardening, painting, minor repairs etc., can be very enjoyable and rewarding. Ultimately, the decision is yours to decide whether home ownership is a fit for you or to continue renting without the benefits of home ownership. These are only a few examples of additional costs that you should be considering if home ownership is a serious consideration.

The ‘Pros and Cons’ of Renting vs. Home Ownership

As we mentioned in the previous section, it’s imperative you explore the benefits and risks associated with renting and home ownership specific to your financial affordability and lifestyle, for example.

Home Ownership Research

Home Ownership Research includes (but is not limited to) understanding the following:

Realtor contracts and their roles
The role of your real estate lawyer
Home inspection and other possible stakeholders
Understanding how mortgages work, along with the role of financial institutions, including financing and lending options
Your credit history and debt
Home ownership insurance
Home contractors for any renovation needs
Moving expenses and closing costs

Home Ownership Benefits and Disadvantages

In addition to providing shelter, home ownership is an investment. You are building equity. A home is in a general sense, a forced savings plan
Financial loss. Your home value is not a liquid asset. If you need to sell during a low real estate market, you may lose money (lower property value, mortgage penalties, realtor fees, legal fees)
Eventually your home will be paid off, with the benefits of increased property growth and equity
Your first home can be your entry point into the real estate market and allow you to upgrade your home based upon your family, lifestyle, or geographic needs
You can renovate or upgrade your home and its property based upon your personal preferences and tastes, and have the benefit of potential increased property values
Rental income. Homes can be a flexible asset. If you want to move on from your current home, but don’t want to sell, you can always rent it
Stability, control over your living space and the pride of ownership

Renting Benefits and Disadvantages

If you are currently renting, you are already aware that it usually costs less to rent, here are a few advantages and disadvantages of renting:

Advantages

Lower costs. Aside from your rent, and perhaps a couple utility bills (e.g., electricity, cable), your total monthly costs are much lower than they would be with a mortgage payment. However, your monthly rental payments can increase each year, as is permitted under the Residential Tenancies Act.
Less worry about repairs and maintenance. In most rental situations, it is up to the landlord to look after any major repairs to the property
A shorter commitment with renting. Which makes it much easier to move to a new premises, home, or geography
The difference between what you would be paying for a mortgage and other home ownership costs and your rent, can be saved and is readily accessible, or used for other investment purposes or to save up for a new home
If you’re renting, you don’t have to worry about municipal taxes, repair, maintenance, and upkeep of the unit you are renting, those fees and costs are usually the responsibility of the owner
If the property value of the rental decreases, it’s of no concern to the renter

Disadvantages

Renting is not an investment. As the rental unit’s real estate value increases, you do not share in that investment value. Your rent continues to be due every month, without any ownership benefits and your rent may be increased from time to time
If the property owner decides to terminate your rental (within the terms of the rental agreement), you will have the burden of finding a new place to live

Home Ownership Affordability

If you don’t have the financial means of:

Saving for a minimum down payment (usually 5% of the home purchase price)
A sustainable income and savings to make your mortgage payments and weather any future income or employments gaps
Paying to keep your home maintained and structurally sound

… then perhaps home ownership may not be for you.

If you don’t have the funds for a down payment, however you have the financial means to save for a down payment, then now is the time to start.

Home Purchase Down Payment

In most cases you will need a minimum of (not including closing costs, which we will get to) *:

Home Purchase Value

Minimum amount of the down payment

$500,000 or less

– 5% of the purchase price

$500,000 to $999,999

– 5% of the first $500,000 of the purchase price
– 10% for the portion of the purchase price above $500,000

$1 million or more

– 20% of the purchase price

*Government of Canada

According to the Canadian Real Estate Association, the average home value in Canada is $538,831, a 5% down payment for this average home would be $30,826. Obviously, that home value may be much higher in major Canadian cities.

Home values in the suburbs of major cities may offer a lower home value and subsequently a lower threshold for a down payment. The average home value in the Greater Toronto Area in April 2021 was $1,090,992, which would represent a down payment of at least $54,550.

Home values on the border of the GTA may be even lower. Whitby, Ontario for example, may have average home values which are slightly lower than the GTA, which would mean a lower down payment.

Whether you need to save $25,000, $35,000 or $55,000 or more, saving up for a down payment will need focus, discipline, sacrifice and hard work.

There are a variety of ways to start, and grow your first home down payment, including:

Focusing on your career. Putting in longer hours, along with promotions and raises in salary
Freelance or gig work as an extra income
Not upgrading your car, or buying a less expensive one
Limiting your discretionary spending. For example, less restaurant meals and take out, and more home cooked meals
Reducing your entertainment expenses
Perhaps putting those vacations on hold until you have saved for your down payment
Finding a rental that costs less
Contribute to your RRSP. The Canadian government will allow first-time home buyers to use up to $35,000 (no withholding tax) of their RRSP for a qualifying home purchase, provided they pay it back over 15 years ($35,000/180 months = $195 per month). For those that have used this plan previously, there may be exception, if you haven’t owned a home for a minimum period.

Government Assistance and Programs

Mortgage Loan Insurance

Mortgage loan insurance must be purchased if you are obtaining a mortgage from a regulated bank and your down-payment is less than 20% of the price of your home. Obtaining a mortgage from a private lender does not carry with it the same requirements to obtain mortgage insurance, but does carry with it increased closing costs. You may wish to read our post on private mortgages ‘Six Factors To Consider Before Contacting a Private Lender’.

Mortgage insurance protects the mortgage lender in the event you fail to make your mortgage payments and are in default. The premium can be added to your mortgage; however, you will pay interest on it and in some cases provincial tax will be applicable.

If the home value is $1 million or higher and if the loan doesn’t meet mortgage insurance standards, mortgage loan insurance will not be available.

The fee for mortgage loan insurance ranges from 0.6% to 4.50%, the rate depends on how much your down payment is, the larger the down payment, the less the mortgage insurance rate will be.

Mortgage loan insurance providers:

Canada Mortgage and Housing Corporation (CMHC)
Sagen
Canada Guaranty Mortgage Insurance Company

Closing Costs

Closing costs are ‘all’ the fees that will need to be paid to finalize the closing and sale of your home. Approximate closing fees range up to 3 to 5% or more of your home’s value.

Closing Cost Fees

These fees may include:

Appraisal fees
Legal fees, including disbursements, title, mortgage, adjustments, and administrative fees
Title Insurance
Land Transfer tax
Home inspection fees
Interest adjustments if there is a gap between the closing date and first payment
H.S.T on new homes or commercial properties

Rebates

As a first-time home buyer, there may be rebates available to help with some of these closing costs, which should be investigated. Of note is the first-time home buyer land transfer tax rebate, which provides a rebate of up-to $4,000.00 on Provincial Land Transfer Tax and a rebate of up to $4,475.00 on Toronto (Municipal) Land Transfer Tax. Qualifications for the rebate are subject to a number of factors, so it is best to speak with your lawyer to determine whether you qualify or not.

Conclusion – Next Steps

Congratulations! You’ve made it to the end of this article, and perhaps you’ve already started your first-home purchase journey.

In our next article “You’ve Decided To Buy: 9 Insights To Help the First Time Home Buyer” we provide insightful details about the first-home purchase process. You will learn about the critical next steps once you have decided that you can afford your first home.