How to Buy A House in Canada - Step by Step Guide
Wondering how to buy a house in Canada? These tips are for you.
Buying and selling real estate in Canada is a legal act of transferring rights to the object of the transaction from the seller to the buyer.
Transfer of property is recorded in the appropriate municipal authority of the district, where a house or an apartment is sold.
If the property you buy includes land on which buildings are located, then the land rights are transferred too.
In Ontario, registration of real estate is administered by the Real Property Registration Branch of the Ministry of Consumer and Business Services (www.cbs.gov.on.ca), also known as the Land Registry Office.
How to buy a house in Canada: A step-by-step Guide:
How to buy a house in Canada - Step 1: You are looking for real estate that you want to buy.
Usually it is done by a real estate agent that you hire (remember, the agent's services are almost always free for the buyer). The agent also shows you the property - you can walk around the house or apartment to conduct a visual inspection of the building and the surroundings, get answers to your questions.
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It is generally recommended to check out at least 7-8 houses or apartments from so you could have a general idea and could compare them. This will help you better understand the market and make the right choice.
Also, at this stage it is reasonable to obtain a mortgage preapproval from a bank or a financial institution.
How to buy a house in Canada - Step 2: Bargaining with the owners of the property.
Once you find a house you want to buy, you start to bargain with the seller by submitting an Offer. This offer takes the form of an Agreement of Purchase and Sale. In this agreement you (or rather, your agent) include the terms on which you are ready to buy the property.
In particular, the proposal specifies the price at which you are willing to buy, and a list of objects from the house or apartment you would like to include in the purchase (we are talking about home appliances, chandeliers, curtains, etc.)
The proposal also stipulates when you are ready to transfer the property rights, and the conditions under which you are willing to buy. Another point to specify is the amount of the advance payment (deposit), which you are willing to give the seller as a proof of serious intentions.
It's very important to include in the agreement conditions under which you can walk away. Normally, a smooth "walk away" could be provided by the results of technical inspections or your receipt of the loan under certain conditions. You should include these terms in order to not lose the deposit.
How to buy a house in Canada - Step 3: Signing the sales contract.
After bidding on a house and approval of all the additional terms and conditions in the contract, the parties come to a decision about the transaction. This is confirmed by acceptance of the offer. At this stage the bid (offer) is transformed into an Agreement of Purchase and Sale. And each side is bound by the conditions specified in the Accepted Offer.
How to buy a house in Canada - Bargaining phase
It's very seldom that the offer is accepted by the seller immediately, without prior bargaining. The exception is when a buyer offers very attractive terms for the seller (a higher price for his house or apartment, no conditions, etc.), which is very rare. Therefore, as a rule, the negotiation process goes through several phases.
If the proposed conditions seem unacceptable to the seller, he can opt out of further negotiations and reject the proposal. However, most often the seller puts the counter terms, passing the initiative to the buyer. The buyer, in turn, can either accept the terms of the seller, or abandon the idea of buying or continue bargaining.
If the buyer wants to continue bargaining, he puts forward new conditions, and presents them in the form of an updated proposal to the seller (counter offer). Thus, the adjustment of conditions lasts as long as the parties fail to reach a compromise or negotiations do not reach a dead end and the parties give up the deal. The agent's skills to negotiate, propose reasonable arguments, feel the mood of the seller and realistically assess the situation come in handy.
After the parties agree to the terms and price and sign the final version of the Agreement of Purchase and Sale, the purchase contract is concluded. Usually at this stage the buyer sends a deposit to the seller's real estate broker, which indicates the seriousness of his intent.
How to buy a house in Canada - Step 4: Execution of the agreement.
Here are the most common conditions included in the Agreement of Purchase and Sale:
How to buy a house in Canada - Obtaining of a mortgage loan by the buyer
Most often, real estate is purchased with the assistance of a mortgage loan from a bank or a financial institution. Since there is always a risk that the mortgage may not be obtained, or the percentage of the loan will be too high, the buyer usually includes into an Agreement of Purchase and Sale a clause to protect him against this situation.
This clause stipulates that if the mortgage is not received, or the interest rate on it will be higher than specified in the contract, the Agreement of Purchase and Sale is cancelled. This condition should be met within 5-7 business days. This period is stipulated in the contract.
How to buy a house in Canada - Technical inspection
Virtually all the buyers include technical inspection in the sales contract. This inspection should be carried out within a certain period (usually within a week). The buyer has the right to withdraw from the purchase if the results of the technical inspection are not satisfactory.
If the inspection reveals problems or defects, the buyer can negotiate with the seller to correct defects or to reduce the price. This clause does not specify what defects revealed during technical inspection may give the reason to withdraw from the contract. For the buyer it's a loophole through which he can safely walk away from the contract, referring to the fact that he was not satisfied with the results of the inspection.
How to buy a house in Canada - Sale of the property by the buyer
This condition is added in case the buyer must first sell his house or apartment, the money from which sale he intends to invest in the purchase of the property in the Agreement of Purchase and Sale. The buyer can specify conditions under which, the signed Agreement of Purchase and Sale is cancelled if he could not sell his property.
The conditions are not limited to the mentioned above. Buyer can make any other conditions depending on the situation. If the Agreement of Purchase and Sale is cancelled due to the fact that the buyer could not fulfill the conditions, or he is not satisfied with the results of the technical inspection, he gets the down payment back without penalty (unless the agreement provides otherwise).
Remember however, that sellers are very reluctant to include additional conditions in the contract, and they can simply refuse to sell on the terms proposed by the buyer. Especially if they get offers from two or more potential buyers.
Once the agreement is in force, and the buyer made a downpayment, he should fulfill all the conditions in due time, or to remove them in writing. For example, the buyer must to get a mortgage within a specified time; but he may cancel a technical inspection.
How to buy a house in Canada - Step 5: Completion of the sale.
Once the buyer has fulfilled all the conditions of the contract (getting a mortgage, conducting technical inspections, etc.), the buyer's lawyer must check the legal purity of the transaction.
First, Title Search is carried out to check if the information provided by the seller is correct. The lawyer also checks if any other people claim an interest in the real estate, other than the seller under the contract; whether there are any complaints about this property; that are no outstanding debts that can pass to the buyer, etc. The task of the lawyer is to prepare the transaction so that the buyer has no problems.
How to buy a house in Canada - Step 6: Closing the deal.
When all the conditions of the contract, on the closing date specified in the Agreement of Purchase and Sale, you must make all necessary payments. Namely, make an initial deposit (downpayment) - minus the already deposited amount, pay the lawyer, pay government taxes and fees, etc.
After that, a deed of assignment is executed to transfer property rights in the relevant municipal authority (Registry or Land Titles Office). Registration of transfer of rights is usually carried out by the lawyers of the buyer and the seller. This document grants the buyer the right to ownership of the purchased property. At this point the buyer becomes the full owner of the purchased property.
You should also know that if after completion of the transaction the buyer finds hidden defects, he has the right to cancel the transaction in court or receive compensation. However, this is only in theory. In practice, this question is undoubtedly complex, and its success would depend on many factors. Therefore, it is better to solve all the issues before completion.This should explain the basic steps and answer the question how to buy a house in Canada.
On How to Buy a House in Canada I used materials written by Helen Riabinin, Sales Representative, Century 21 St.Andrew's Realty Inc. for Russian Toronto.
Who is involved in the buying process - Part 2 of How to Buy a House in Canada
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