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Buying a new home is arguably the largest purchase you’ll ever make.

Buying your first new home can often be a very daunting experience.

The Real Estate industry, just like any other, has a number of intricacies that can prove costly for those unaware of them.

I know it was for me.

The problem was that I didn’t know – all that I didn’t know. Mix in the legal and banking industries and the entire home buying process gets even more convoluted.

I’ve made it my mission to correct this. Consider me, Eddie Castilloyour First Time Home Buyer’s Resource!

I spent thousands more when buying my first home than my neighbour did, and I hope to make sure that never happens to you!

  • I didn’t know about “fair market value”
  • I didn’t know that a buyer should have their own real estate agent
  • I didn’t completely understand the mortgage or offer processes
  • I was unaware that you can negotiate on price and contingencies

Don’t let this happen to you.

Start here, learn all you need. If you still have questions, give me a call.

Real Estate 101: An FAQ for First Time Home Buyers

However, these questions are more often overlooked than asked, because new home buyers predominantly don’t know – that they don’t know.

Regardless of whether you’re just considering buying a new home, or right in the thick of your real estate listings search, this area will be very valuable to you.

I explain:

  • what to should consider before you begin searching for real estate,
  • what you should keep in mind while searching and visiting open houses,
  • what to expect during the offer making process,
  • and everything involved after the purchase offer has been accepted.

I generally tell people to call me before they call the number on the “For Sale” sign, but before anything, read this Real Estate 101 – it would have saved me nearly $7,000!

Answers to Frequently (or Rarely) Asked Realty Related Questions

  • If you are a buyer, it’s 100% FREE to use a realtor
  • There are usually two realtors in each real estate transactions.
  • One realtor represents the seller and one realtor represents the buyer.
  • Realtor fees: The buyer should NEVER pay realtor fees; the seller should always pay the realtor fees. The seller pays both realtors. This is standard practice, not only in Alberta but everywhere in Canada and most other countries as well.
  • Lawyer fees: The buyer pays his/her lawyer to close the transaction; the seller pays his/her lawyer to close the transaction.
  • If the buyer does not have a realtor but the seller does, the seller’s realtor will get paid both commissions (the seller’s and the buyer’s portion).
  • This is why every buyer should have a realtor. It’s FREE and very helpful!
  • Usually if neither the buyer nor the seller have a realtor, meaning the buyer and seller are self represented, the lawyers can perform all the paperwork – but the buyer and seller will pay much higher lawyer fees because the lawyer’s will have to do twice the paperwork (that each realtor usually does)

Things to Consider Before Starting Your Home Buying Process

Ideal Home

Consider your home overall, and then each individual room in your house. What feature or fixtures are must-haves, which are simply nice-to-have’s? Which should your new home not have at all?

It’s best to have a thorough idea of what you’re willing to sacrifice and what you’re not willing to live without before you begin your new home search. This will help you greatly narrow your search volume and improve your efficiency while identifying potential new homes.

Consider sizes (get yourself a tape measure!) of rooms, windows, closets etc. Measure your current spaces and then make notes on what sizes would be ideal.

Consider materials and textures – woods, stones, metals, synthetics (plastics, linoleum, carpeting etc.)

  • Yard – size, landscaped, fenced,
  • Kitchen – flooring (hardwood/carpet?), windows(size/energy efficient?), countertops, cupboards, dishwasher, stove, fridge, lighting
  • Bathroom – soaker or jacuzzi tub? Shower, vanity, lighting, shelving
  • Master Bedroom – flooring (hardwood/carpet?), windows?,closets (walk in?), space to accommodate bed,
  • Bedrooms – flooring (hardwood/carpet?), windows(size/energy efficient?), closets (walk in?), space to accommodate bed,
  • Living areas – flooring (hardwood/carpet?), windows(size/energy efficient?), lighting, shelving
  • Driveway/Garage – gravel/paved, heated/non, single/double
  • Additional Storage – closets, basement, garage, sheds,

Ideal Location

  • Considering your family’s lifestyle and your commute where would your ideal home be located? What amenities would you need to be close by?
  • Consider shopping, nature-ways, thoroughfare access, schools, playgrounds, etc.

Mortgages

There are two ways you can go about this: pre-qualified and pre-approved.

Pre-Qualified means that you could be approved for an amount IF the information you provided the lending institution (bank) is accurate. Does not include the in-depth investigation process into your credit.

Pre-Approved means that the lending institution (bank) has already gone through the in-depth investigation process (credit check: including reviewing credit history, tax returns, employment verification and history) to discern that the information you provided is in fact correct and agree to lend you an indicated maximum amount.

Understand also that obtaining a mortgage is a process. The number of days can vary by application and factors involved including: type of loan required, whether an appraisal is needed, whether the title needs to be cleared, and timeliness of filed paperwork etc. This is why it’s a good idea to begin this process with pre-qualification or pre-approval even before you begin to search for your new home.

Things to Consider While “House Hunting”

With your pre-qualified or pre-approved mortgage amount, your list of ideal neighbourhoods, and list of new home must-haves it’s time to begin your new home searching adventure!

Searching Real Estate Listings

Most real estate agencies websites will allow you to search available listings by area, price, features, and amenities – (you can search on our site here!)

Listings are not proprietary – all registered real estate agents are allowed to list and show homes available on MLS – Multiple Listings Service(s).

The purpose of this is to provide a co-operative, yet competitive landscape for real estate brokers. We all share the “pool” of available homes – but compete on our unique style of individual, personalized service.

This allows you to benefit from choosing the realtor that offers the level of service you expect, while not having to miss out on any of the available properties.

Finding Yourself a Realtor

The person(s) selling the property pay all the realtors involved whether they are the listing agent, or the buying agent.

So, if you’re a new home buyer – having an agent working for you is absolutely free!

Search new home listings on any site that suits your methods, but spend a bit of time reading each agencies About Us page to make sure they provide the kind of personalized service you expect.

You’ll discover some agent prefer to work for sellers, others prefer to work with only home buyers, others are more knowledgeable in commercial real estate or strictly interested in foreclosure sales.

Me, I’m Edmonton’s First Time Home Buyer’s Resource – meaning I specialize in helping first time home buyers with their first new home purchase, but that doesn’t mean that I can’t help you purchase your 2nd, third or 23rd new property!

Regardless of where you search, or who you choose, if you’re purchasing a new home – get yourself a realtor – after all, it’s free!

Viewing Homes

When you’ve narrowed your list of potential properties, it’s time to set up appointments to see them! Remember to take your list of must-haves with you, and a tape measure to make sure your potential new homes “measures up”!

Although we would encourage you to ensure that your potential new homes have a full home inspection done by a certified home inspector, we would also support educating yourself on a few simple indicators of potential problems such as:

  • drainage problems on the grounds,
  • weathered shingles or roofing,
  • condition and level of masonry – foundation, drive and walk-ways,
  • structural integrity of windows, stairways and rails,
  • electrical – ensure that all switches and fixtures are working,
  • plumbing – ensuring that there are no leaking pipes or fixtures,

Questions to Ask the Current Home-Owner

Sometimes, potential difficulties aren’t immediately apparent. Just as a visual review of electrical or plumbing fixtures wont necessarily reveal problems sub-surface, issues with noisy neighbours or possible school issues can only be discovered with further investigation – and sometimes, that’s as simple as asking a few questions:

  • How is the neighborhood/area?
  • What are the neighbours like?
  • How are the schools?
  • What are the average utility bills? Property taxes?
  • What’s the age of the (shingles/roof, furnace, windows, hot water heater etc.)?
  • Has the house been appraised/inspected?

Legal Representation

Now would also be the time we would suggest seeking your legal representation. When you find the home you want, you’ll have to make an official Home Purchase Offer which will require the services of a qualified lawyer. It’s better to have legal representation chosen at this point to avoid the house being purchased while you wait for potential lawyers to respond.

Things to Consider When Placing A New Home Purchase Offer

Isn’t this exciting?! You’ve found a great new home, you’ve made sure that you can qualify for a suitable mortgage – it’s time to make the offer!

However, there are a few things you’ll encounter, and from experience, I know that knowing about them ahead of time will help make sure that they don’t dampen your excitement!

Easements, Restrictive Covenants, and Encumbrances

There are a few concerns that you may encounter, but aren’t always a consideration. However, knowing and understanding them will help you avoid or navigate them should they be encountered.

An Easement is a right or privilege given to a person or entity (often a municipality) for limited use of property owned by someone else – such as municipalities power, sewer or natural gas lines passing through a person’s property.

A Restrictive Covenant is a contract giving one land owner the right to restrict the future use of the land in a way that may be detrimental to it’s future resale. Such as a land developer restricting a parcel of land to be used for single private family dwellings only, meaning no commercial, and no multi-family (duplex, condos, or apartments etc.) can be built on the land.

An Encumbrance is a the general catch-all term meaning some sort of claim or restriction on the land – these may include restrictive covenants and easements – in addition to other restrictions.

Conditions – There are a variety of things that can be considered a “condition” for both buyers and sellers. These become part of the Negotiating process. One party is willing to accept the offer IF their conditions are met, such as:

  • A buyer expecting the seller to acquire a complete satisfactorily passed home inspection
  • A buyer expecting repairs will be made prior to them taking possession
  • A buyer being afforded the time to sell their current home in order to qualify for their expected financing
  • A seller being afforded the time to find/purchase a new home before vacating
  • A buyer’s offer being contingent on the appliances being included

Timings

Most offers to purchase have a time limit – a date by which the seller must either accept or decline the offer. But they also potentially include other date or time expectations:

  • Date of title transference,
  • Dates of insurance and tax transference,
  • Date of possession,

Things to Consider After A Purchase Offer Is Accepted

You’ve found your next new home, made an offer and they’ve accepted! Congratulations! However, before you crack the champagne at your housewarming party there are a few other details that need to be taken care of.

Secure your Mortgage

We previously discussed getting pre-qualified or pre-approved for your mortgage, now you’ll have to make appointments with

your choice of financial lender. You’ll need to provide updated financial statements and documents. Even if you provided some during the pre-qualification or pre-approval process. An underwriter will review the proposed loan and compare it to your financial situation before giving their final approval, and they agree to lend you the funds.

Earnest Money

Earnest Money is a good-faith deposit that may be required to confirm your commitment to purchase the property while you finalize the securing of your mortgage. These funds will be held in escrow and will go toward your down payment when the transactions are finalized.

Generally, if a buyer pulls out of the deal the earnest money is returned to the prospective buyer. If it is the buyer who decides not to continue with the agreement, the funds are usually awarded to the seller.

Schedule Home Inspections and Appraisals

You should never purchase any piece of property without first having an inspection and appraisal conducted. This ensures that both the buyer and seller are both fully informed about the current state of the home and property. There are a variety of inspections that you can have completed. There are general inspections which will work in most situations. However, if there are any areas of concern, you can have a more specialized inspection done such as a thorough roof inspection, or a pest inspection to ensure that there are no parasite concerns to take into account.

Who pays for inspections? As a buyer, you can include this as a condition expecting the homeowner to provide one. As a Seller, you may want to let the Buyer acquire their own, as they may question the objectivity or thoroughness of one you provide.

Before approving a mortgage, all lenders will have an appraisal conducted during the underwriting process. They absolutely want to ensure that they know the current and potential market value of a home or property before they agree to lend the funds for it’s purchase. The results of this appraisal may have an effect on the amount of mortgage the lending institution agrees to provide

Purchase Home-Owner Insurance

You’re not required to purchase homeowner insurance if you’re purchasing your new home without the help of a mortgage. But I would strongly urge you to do so anyway. Buying a home is almost always life’s largest purchase, make sure your investment is secure.

If you’re obtaining a mortgage to help purchase your home, your financial institution will most definitely insist that you obtain homeowner insurance before they agree to lend you the funds. In most cases, buyers are expected to provide proof of homeowner insurance before being approved for a mortgage. Depending on where you live, you may need to purchase additional insurance, such as flood coverage.

Just like with your mortgage, make sure to research a number of different insurance providers to compare rates. You’re already agreeing to pay a large sum each month for your mortgage, save what you can in other areas! Make sure that your financial situation allows for the expense and that it won’t affect your lending institutions decision to approve your mortgage.

Final walk-through

Whew! It has been a lengthy process, but you’re nearly finished! One last walk-through to make sure everything is to the buyer’s satisfaction. If the inspection(s) discovered any repairs required, if there were any other conditions, this is when you would make sure that they’ve been completed. Typically, you’ll complete this step within 24 hours of closing (see below).

This is also your last chance to make sure that nothing was overlooked, and that nothing has occurred since the inspections were conducted. Request the receipts for any repairs that were requested. If the home has been vacant, or if there were any significant weather incidents these can provide opportunities for property damage – check for any new damage that may have occured.

Here’s a brief final walk-through checklist for you:

  • Electrical – outlets, light fixtures, ceiling fans, security systems (remember to check the garage and outside outlets/fixtures too!), test all appliances remaining in the home (you may want to request any warranty or owner manuals at this time)
  • Plumbing – run taps, check drains, flush toilet (check sewer drainage outside the home)
  • Heating/Cooling – furnace, hot water heater, thermostat, air conditioner
  • Windows and Doors – ensure all windows and doors are damage free, that they open/close properly, and request keys for all locks to make sure they’re operational
  • Foundation – look for cracks or signs of flood damage
  • Floors and Walls – make sure there isn’t any new significant damage
  • Yard – tour the property, look for signs of flooding or sewer drainage problems, assure that the plants, shrubs and fixtures such as fences, pools, fireplaces, or gazebos are all in the condition expected

You may choose to bring a home inspector with you during your final walk-through in the event that there were significant repairs that needed to be made. They can help you make sure that the repairs were done satisfactorily.

If there are any new damages discovered, or the agreed upon repairs were not done satisfactorily, you have a few options. If they are significant enough, you may choose to walk away from the deal altogether. However, if they’re minor you can simply choose to wait until the homeowner can have the repairs completed, or agree to take the repair cost off the final cost of the home.

While I know that by this time, a home buyer is eager to have the process completed. We just want to move into our new home already! BUT, I encourage you to make sure that you do not skip this all-too-important last step.

Always conduct a final walk-through!

Closing A Real Estate Agreement

Could it be? Are we nearly there? The house is everything you thought it would be, you’re excited to move in. But, there are a few last details to attend to before you do.

After your final walk-through and everything is as you hoped, it’s time to sign the paperwork and close the deal.

The closing of a real estate deal requires a number of parties. The seller, the buyer, each of your Realtors and lawyers, a representative of the lending institution, and a representative from the title company.

The title company representative will have conducted a Title Search to assure you that there are no liens or other claims to the property and that you can in fact take ownership of the home or property. Your lending institution will insist that there are no other parties who can lay claim to ownership of the property should they need to sell it in the event that you default on your mortgage agreement. You will be provided

When:

  • you, your Realtors, and lawyers are satisfied with the conditions of the agreement, that all prior conditions and repairs have been taken care of, when all inspection reports and repair receipts have been submitted;
  • when the financial institution is satisfied that their investment is secure after they’ve been assured that there are no other claims to the title of the property, that you’ve shown that you have obtained mortgage and homeowners insurance;
  • When all the financial details have been settled and recorded – such as closing costs, title insurance, mortgage insurance, property and land transfer taxes, legal fees, and any adjustments required,

Then it’s time to sign the paperwork and obtain the keys to your new home!

When you’re heading in to sign your paperwork make sure you bring these items with you to ensure that there are no obstacles:

  • Your ID – you’ll be required to show proof of identity
  • Cashiers Cheque –  for final amount owed – from your mortgage provider
  • Personal Cheque –  for any extraneous costs – such as legal fees, taxes etc.
  • Proof of Insurance – homeowner, title and mortgage
  • Occupancy Permit – if you are purchasing a newly built home, you’ll obtain this from the homebuilder – it simply states that the home you’re purchasing passes all required building safety codes and is fit for habitation
  • Certificate of Occupancy – may be required to show that your intended use of the property doesn’t conflict with municipal zoning laws. This will be more for commercial or industrial property purchases more so than residential real estate agreements.

Things to Consider For Moving Day

Ah the jingling of new home keys, what a lovely sound! Almost as nice as the gleeful celebrations of  new home owners!

But, there are a few last details that you can consider to make sure that nothing dampens your new-home-owner excitement.

You won’t usually receive your keys until the afternoon after you sign your final paperwork. Make sure that you arrange your move around this. You don’t want to be waiting around in the moving truck for your new house keys to arrive . Especially if you have a moving company on the clock!

Ensure your creature comforts on moving day by scheduling the transfer of all of your utilities, cable and internet services ahead of time. Nobody enjoys the first night in their new home in the dark, and you can’t Facebook your joy without internet!

That’s it! The Home Buying Experience from start to finish!

I hope this guide has helped you understand the steps included in the new home buying process. If you have any questions or have encountered something not on this list, let me know, I would love to take the journey with you…

if you’ve been thinking of selling, or buying a new home here in Edmonton, especially if you’re a First Time Home Buyer, give me a call.

If you’re just starting your home buying journey, search the available Edmonton MLS listings.