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Buying your House
What is the difference between a real estate agent and a real estate broker?
The person you normally deal with is a real estate agent or salesperson. The salesperson is licensed but must work for a broker. All listings are placed in the broker's name, not the salesperson's.
A broker can deal directly with home buyers and sellers, or can have a staff of salespersons or agents working for him or her.
Why should I use a real estate salesperson?
A real estate salesperson is more than just a "sales person." They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home. While it is true they get paid for what they do, so do other professions that provide advice, guidance, and have a service to sell --such as Certified Public Accountants and Attorneys.
The Internet has opened up a world of information that wasn't previously available to homebuyers and seller. The data on listings available for sale is almost current - but not quite. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.
If you're selling a home, you gain access to the most buyers by being listed in the Multiple Listing Service. Only a licensed real estate agent who is a member of your local MLS can get you listed there - which then gets you automatically listed on some of the major real estate web sites. If you're buying or selling a home, the MLS is your agent's best tool.
However, the role of an agent has changed in the last couple of years. In the past, agents were the only way home buyers and sellers could access information. Now agents are evolving. Because today's home buyers and sellers are so much better informed than in the past, expertise and ability are becoming more important.
The real estate agent is becoming more of a "guide" than a "salesperson" -- your personal representative in buying or selling a home.
What is the responsibility of the real estate broker to me?
A realtor must disclose to you in writing, who exactly they represent in any real estate deal. A realtor may represent you as a buyer or a seller; he or she may also represent both buyer and seller in the same transaction. Because all realtors are guided by a stringent Code of Ethics and Standards of Business Practice, a realtor will always treat you fairly.
As your agent, the realtor owes you the duties of utmost care, integrity, confidentiality and loyalty. Make sure you discuss agency with your realtor. If a realtor is showing you homes, they are automatically deemed to legally be your agent, and owe you all of the associated obligations.
What do I need to decide when I’ve decided to buy a home?
If you've decided to buy a home, start by determining what type of community, or specific neighbourhood, you're interested in. List your space needs, including:
- living space requirements (i.e. how many bedrooms);
- what you're bringing with you from your old house;
- how close to schools, shopping and other services;
- the size of down payment you can afford; and,
- price range.
How will a real estate broker help me find my dream home?
Once you've identified the features you want in a home, the search begins. A REALTOR will use various tools to try and find properties that meet your specifications. One of the important search tools will be the local MLS® system. By sitting down at a computer the REALTOR can key in your needs, choice of neighbourhoods and price range and immediately come up with a list of suitable properties available through the MLS® system. Also common are MLS® catalogues, which provide additional information about each property, along with its photograph. Both computer systems and catalogues are updated regularly.
How do I decide my price range when buying a home?
It's important to be realistic when you're thinking about a down payment and setting a price range. You don't want to be saddled with something you can't afford. At this stage, it's a good idea to talk things over with a real estate sales professional.
Once I find a house I like, what would be the next step?
Once you find the house you want to make your home, you can work with a REALTOR to develop an offer. In the offer, you should specify how much you're willing to pay. State when the offer expires, and suggest a closing date for the transaction. You can also propose some conditions on the offer. Some common types of conditions are:
- getting a suitable mortgage (include the amount, interest rates and any other figures you feel important);
- selling your current home (the seller may continue to look for a buyer, but will give you the right of first refusal);
- the seller providing a current survey, or a "real property report," showing the location of the house on the property owned by the seller and that there are no encroachments;
- the seller having title to the property (your lawyer will check this out when he or she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions);
- if there is a septic system, the seller should have a health inspection certificate, stating the system meets local standards;
- if you still have any doubts about the home's safety and construction, you may wish to make the purchase conditional on an inspection by a qualified engineer;
- any inclusions - basically, what stays and what goes.
What will I need to bring with my offer?
You will need to present a deposit along with your offer. An appropriate deposit will show your good faith to the seller. The seller's agent is bound by law to bring all offers to the seller's attention.
After your offer is accepted and all the conditions are met, the offer becomes binding on both sides. If you walk away from the deal at that point, you may lose your deposit. You may also be sued for damages. Therefore make sure you understand and agree with all of the terms of the offer before signing.
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Selling your House
What is a listing agreement?
The process of selling a home with a REALTOR starts with the Listing Agreement. It's a contract between you and the brokerage company that the agent represents. It is a framework for subsequent forms and negotiations. It's important the agreement accurately reflects your property details and clearly spells out the rights and obligations of all parties. Both you and the listing agent sign the listing agreement and each receive a copy. The agreement binds both parties to its terms and conditions.
What is the main idea about this agreement?
Generally, in the agreement you appoint the brokerage company as your agent and give its representatives the authority to find a purchaser. The duration of the agreement is indicated, and the compensation is specified. The agreement also sets out the listing price, and accurately describes the property you are selling. That will include the lot size, building size, building style and materials, floor areas, heating/cooling systems, room sizes and descriptions.
This is when you must also decide what you are taking with you and what you are leaving with the house. Generally, unless stated otherwise, fixtures remain with the property, while chattels -- things which are movable -- aren't included in the sale. If necessary, what stays and what goes are listed under "inclusions" or "exclusions."
Finally, the Listing Agreement also details the financial conditions of the property, including the mortgage balance, mortgage monthly payments and the mortgage due date. It should also provide information about annual property taxes; and references for any easements, rights of way, liens or charges against the property.
Why should I list with a realtor?
One advantage of listing with a REALTOR is that only a REALTOR is able to place your listing on the MLS® or Multiple Listing Service ®, which is the co-operative listing system operated by local real estate boards.
When your listing is placed on the Multiple Listing Service®, the information about your property is shared with all other REALTORS accessing MLS®, and all REALTORS have the opportunity to sell your property. This type of cooperative effort will result in the listing agent offering compensation to the selling agent. Your property gains more exposure, because it reaches the majority of the real estate professionals in your community.
How much should I ask for when selling a property?
One major issue for anyone selling a property is how much to ask for. Although you may have an idea of how much your house is worth, it's important to have your home valued by a professional on its own merits. Be careful not to price yourself too high or too low. If it's too high, there's no sale; too low and you lose on your investment.
A REALTOR has the research and expertise to provide a market assessment of what similar properties in your area have sold for. They can also provide information on market history, such as the number of properties sold in your community the previous month or year.
What different tools does a realtor have to help me sell my home?
Your REALTOR may also recommend an Open House as a marketing strategy. There are two types: first is an agent's open house, where sales representatives from the listing company will be invited to view your house. If you have signed an MLS® agreement, other REALTORS may also be invited. Remember, each of these REALTORS may have a prospective buyer.
What is a public open house?
The second type of open house is a public open house, where members of the public are invited to walk through your home and have a look. It's an efficient way to show your home to many potential buyers at once. The listing agent will act as host, answering any questions.
You and your listing agent will pick the time and date for an open house. In order to give the agent access to your home, you may wish to keep a key at his or her office, or in a lockbox. It's also a good idea to ensure that any valuables are put away in a safe location, then leave while the open house is underway. If you do stay, be sure to keep out of the way, and turn off any TVs or radios to let the agent and the buyer talk in peace.
What do I need to do to prepare my house for an open house?
Needless to say, clean counts with open houses. A general rule is that clean, uncluttered and well-lit spaces look larger and more attractive. People will naturally want to buy a house that is clean and well cared for.
What if my house isn’t selling?
Sometimes a home doesn't sell right away. Avoid the urge to pull your home off the market... be persistent! Generally, there are three reasons why a home may not sell as fast as others. First is location; second is condition; third is the asking price.
Naturally, you can't change your home's location, but you can fix the condition of your home and you can, of course, adjust your price. Throughout the listing process, you need to be constantly comparing your asking price against those of similar properties in your area. It may be time to adjust the price of your home.
Review your selling strategy regularly with your listing agent: Is your house being shown regularly? Are you receiving the feedback from prospective buyers? Are you in touch with the marketplace? Is your property competing well? If not, what else can you do?
If I get an offer, should I accept it?
Once a buyer is found, you'll be receiving an offer that will detail how much, specify any conditions that may apply or be attached by the buyer, say when the buyer would like to take possession, and when the offer expires. As an act of good faith, the buyer will make a deposit with the offer.
You don't have to accept the offer as is. You may wish to make a counter offer that comes part-way to meeting the offer's conditions. The counter offer is one more step along the way to negotiating the final terms and conditions of the sale.
Once the offer is signed, if I change my mind, can I get out of it?
The offer, once signed by everyone, is a binding contract. Make sure you understand and agree to all of the terms in the document. You may want to have it reviewed by your lawyer before signing.
What if I’m asked to give the buyer a current survey? Do I need to?
Before closing, especially if the buyer makes it a condition of sale, you may be asked to provide a current survey, or a "real property report," showing the location of the house is on the property owned by you and that there are no encroachments. You may also have to prove that you have title to the property (the buyer's lawyer will check this out when he or she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions). Especially in rural areas, you may also be asked to provide a certificate for a well or septic system, stating the system meets local standards.
The buyer may also make the purchase conditional on an inspection by a qualified engineer or inspector.
Do I need a lawyer? If I do, what is their role?
Then on or before closing day, lawyers representing you and the buyer will set up a trust account for the money coming from the sale and will pay off any mortgages you owe on the property. After these are paid, you will receive any money you have coming from the sale. You must deliver the property deed or transfer documents, mortgage details and keys to your lawyer. Your lawyer will register the mortgage discharge and transfer the deed at closing,
Your lawyer should also ensure that you receive compensation for prepaid expenses such as, property taxes, electrical or gas bills, or if applicable, any heating oil left in your tank. Some lenders will make it possible for your mortgage to be portable, so you can take your mortgage with you when you move to your new home. |
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Buying/Selling Homes: Glossary of Terms
Amortization: Paying off a debt, such as a mortgage, by installments. The conventional amortization period for a mortgage is anywhere between 15 and 25 years. The shorter the amortization period, the less interest you have to pay.
Appraisal: An estimate of a property's value.
Asking (list) price: The price placed on the property for sale by the seller.
Blended payments: Payments consisting of principal and interest components, paid during the amortization period of a mortgage.
Broker: A person licensed by the provincial or territorial or state government to trade in real estate. Real estate brokers may form companies or offices, which appoint sales representatives to provide services to the seller or buyer, or they may provide the same services themselves. In some areas, brokers are referred to as agents.
Buyer's Agent (also known as "Buyer's Broker" or "Purchaser's Agent"): A person or firm representing the buyer. A Buyer's Agent's primary allegiance is to the buyer. The buyer is the Buyer Agent's client.
Buyer Brokerage Agreement: A written agreement between the buyer and the buyer's agent, outlining the agency relationship between the two parties and the manner in which the buyer's agent will be compensated. In some states or provinces, a buyer agency relationship arises automatically, without a written agreement establishing the relationship.
Client: The person being represented by an agent. The agent owes the client the duties of utmost care, integrity, confidentiality and loyalty.
Closing: The day the legal title to the property changes hands.
Commission: An amount agreed to by the seller and the real estate broker/agent and stated in the listing agreement. It is payable to the broker/agent on closing and shared, if applicable, among those salespeople involved in the sale.
Customer: A person who receives valuable information and assistance from a real estate broker or salesperson, but is not represented by that individual.
Debt-Service Ratio: The measurement of debt payments to gross household income which may include, in addition to the main wage earner's salary, salaries of other wage earners, commissions, bonuses, overtime, etc.
Dual Agent: A real estate broker or salesperson who acts as agent for both the seller and the buyer in the same transaction. Both buyer and seller are the agent's clients.
Equity: The difference between the value of the property and the amount owing (if any) on the mortgage.
Financial Institutions: Banks, credit unions, insurance or trust companies.
Gross Debt Service: The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered.
Gross Debt Service Ratio: Gross debt service divided by household income. A rule of thumb is that GDS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income. Sometimes energy costs are added to the formula, producing PITE, which moves the rule of thumb GDS to 32%.
Listing Agreement: The legal agreement between the listing broker and the seller, setting out the services to be rendered, describing the property for sale and stating the terms of payment. A commission is generally payable to the broker upon closing.
MLS®, Multiple Listing Service®: They are used in conjunction with a real estate database service, operated by local real estate boards, under which properties may be listed, purchased or sold.
MLS®Online™: Carries MLS® property advertisements and consumer-related information supplied by individual real estate boards and associations.
Mortgage: A contract providing security for the repayment of a loan, registered against the property, with stated rights and remedies in the event of default. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan.
Mortgage Broker: A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. The mortgagor pays the broker a fee for arranging the mortgage. Appraisal and legal services may or may not be included in the fee.
Mortgagee: The person or financial institution lending the money, secured by a mortgage.
Mortgagor: The property owner borrowing the money, secured by a mortgage.
Offer of Purchase and Sale: The document through which the prospective buyer sets out the price and conditions under which he or she will buy the property.
Real Estate Board: A non-profit organization representing local real estate brokers/agents, salespeople, which provides services to its members and maintains and operates a MLS® system in the community.
REALTOR: Trademark identifying real estate professionals, and as such, subscribe to a high standard of professional service and to a strict Code of Ethics.
Term: The actual life of a mortgage contract-- from six months to ten years -- at the end of which the mortgage becomes due and payable unless the lender renews the mortgage for another term (See Amortization).
Seller's Agent: The Seller's Agent represents the seller -- either as a Listing Agent under the listing agreement with the seller or by cooperating as a Sub-Agent, typically through the MLS® system. In dealing with prospective buyers -- customers-- the Seller's Agent can provide a variety of information and services to assist the buyer in his/her decision-making. The Seller's Agent does not represent the buyer.
Variable-rate Mortgage: A mortgage in which payments are fixed, but the interest rate moves in response to trends. If interest rates go up, a larger portion of your payment goes to the interest; if rates go down, more goes to cover the principal.
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