WHAT EXPECT WHEN BUYING A HOUSE IN ALBERTA
Buying house is often one of the most important, yet stressful, purchases a person will make in their lifetime. For many, the interaction of the numerous key players, the large sums of money involved, and tight deadlines can seem daunting.
This article aims to lay out up the basic steps you can expect when buying a house. Keep in mind that this is legal information – not legal advice. Every real estate transaction is unique and the earlier in the process you speak to a real estate lawyer the more likely they help you avoid any potential issues along the way.
Stage One – Initial Preparation
The time has come and you decided to buy a house. The first step…get all the key players contacted, organized, and brought together. Although many people initially only contact a realtor it is just as important to contact the lender/mortgage broker and lawyer as soon as possible. Each key player plays an important part at this stage and, as a general rule, the sooner all of them are lined up the smoother it is to buy a home.
At this stage your realtor will play a large role because unfortunately you need to find the house of your dreams before you can buy it. Every realtor will have their own unique style but it does help to have an idea of what you want in a home. Determine some “must haves”, such as a double car garage or proximity to a school, as well as “dealbreaker’s”, such as no corner lots or infill housing, and tell your realtor. This will streamline the search and hopefully speed up the process of finding a house. Remember to never feel pressured to put in an offer. It may seem like an endless search but the right place will eventually turn up and you may be happy you did not rush it.
PRO TIP: Ensure that you and your realtor have a good rapport prior to signing any exclusive representation agreement. The better the relationship between the both of you the easier it will be navigate the house search.
While you are searching for that perfect home you will also want to figure out the limits of your purchasing power. Your lender or mortgage broker will help you determine the amount of financing you can receive and therefore the house you can ultimately afford. In order to make this determination they require background financials and often a credit check. Although every financial institution or mortgage broker has a different process, once all the documentation is in order they often provide a pre-approval. Essentially, this gives you with some assurance that, barring changes in circumstances, you can expect to receive mortgage funds in the amount of the pre-approval. Obviously this can be subject to change and other factors, so it is important to ask your bank or mortgage broker any questions.
PRO TIP: Save time by bringing as much financial information to your meeting with the bank or mortgage broker, including recent paystub’s, notices of assessment, and bank account statements.
Many people fail to contact a lawyer at this stage. However, it is never too early to contact them. The fact is that, even at this stage, there can be issues which your lawyer may be best suited to solve. When it comes to buying a home, the sooner a problem is discovered the more time you have to deal with it. A few reasons to get your lawyer involved earlier:
- A lawyer may be able to advise you about a registration on the Certificate of Title which makes the property far less valuable;
- A lawyer may have had other clients buy homes in that area and know of other potential issues; or
- A lawyer may be an invaluable source of referrals for other aspects of the home buy processes such as inspections or financing.
At the very least, the sooner you call the lawyer the sooner they can be available to answer any future questions. You do not want to be scrambling to find a lawyer to answer your question at the 11th hour before waiving conditions. Now that the key players are ready and the preparations are complete it is time to hopefully find a house and put in an offer.
Pitfalls to Avoid:
- Do not rush this stage – the first house you viewed may seem like your dream home but if actually can not afford it or never look into the disastrous restrictive covenant on the Certificate of Title it might turn into a
Stage Two – The Offer
After a long search you finally found the house of your dreams and you are excited to put in an offer. Here is where all of the work you put in during stage one finally pays off. By now, you and your bank/mortgage broker have determined what you can afford and you’re probably already pre-approved. Hopefully your realtor knows the pricing limits as well as your “must haves” and “dealbreakers” for the upcoming negotiation. Finally, you have a lawyer on speed dial to answer any legal questions before final offer is sent.
The realtor will often draft the initial version of the offer on a standard form contract. The offer will include the important items such as the purchase price, the deposit, conditions, and the closing date. Everyone is always very eager to send out offer as soon as possible. Although it is true that in a hot real estate market time is of the essence, it is still one of the biggest purchases of your life and having a second set of eyes look over the contract will not hurt.
PRO TIP: Clarify any points of confusion regarding the contract now. It is always better to ask before you send out the offer.
Once you are satisfied with the offer it will be sent out by either your realtor or lawyer at which point the ball is in the sellers court. Offers will have an expiry date upon which the offer is no longer valid and you must submit a new offer. However, most often the seller will either accept your offer outright or make a counter-offer which may lead to a back-and-forth negotiation before the parties settle on terms agreeable to both sides. After the offer or counter offer is accepted the buyer and seller will enter into the conditional stage of the transaction.
Pitfalls to Avoid:
- Double check everything before you sign – Look for errors in prices, names, and addresses to ensure that the correct offer goes out. Better yet, have a second set of eyes, such as your lawyer, look it over
Stage Three – The Conditional Period
Most real estate contracts, even after being signed and accepted by the buyer and seller, are still conditional. This means that until the conditions are either met or waived the contract is not final. Conditions can only be waived by the party who placed them on the contract. If those conditions are not met or waived by the condition expiry date then the contract is void. Although conditions can be placed on a contract by either the buyer or the seller, the majority of the time the conditions are placed on the contract by the buyer and thus must be waived by them. These commonly include a condition for the buyer to obtain financing, review condominium documents, if applicable, and a condition allowing the buyer to inspect the property.
The conditional period, the time between the signing of the offer and the condition date, often provides the buyer with both time and access to the property in order to determine if they will proceed with the purchase. Once the conditions are waived, the contract will be final and the buyer and seller are both obligated complete the transaction. Failure to complete the transaction could result in the buyer losing their deposit and potential legal consequences. Therefore, it is extremely important, especially for the buyer, to ensure they are satisfied that the conditions are met and they are prepared to buy the property before waiving any conditions.
Ideally, buyers should contact a lawyer with any questions prior to waiving their conditions as this can help to avoid any pitfalls before it is too late.
Pitfalls to avoid:
- Never waive your conditions until you know your financing is finalized. Otherwise, you may be on the hook to buy a property that you cannot afford.
Stage Four – Meeting the Lawyer
Once your conditions have been waived the focus shifts to your lawyer to finalize the transaction. Numerous documents and instructions will be sent to lawyer from both your realtor and the lender/mortgage broker. Thus, it is important, if you have not done so already, to provide your lawyers’ contact information to both your real estate and your lender/mortgage broker.
Your lawyer will begin preparing all of the necessary conveyance documents for land titles as well as all of your mortgage and finance documents. Since lenders usually do not provide enough funds to pay 100% of the purchasers price your lawyer will determine the amount still needed to complete the transaction, known as the shortfall, which you will be required to provide to your lawyer usually in the form of a bank draft or other certified funds. Depending on your lenders requirements you will also likely have to provide your lawyer with proof of home insurance as well as photo identification.
PRO TIP: You will almost always be required by your lender to have home insurance. Therefore, once you have waived conditions it is a good idea to start the process of obtaining home insurance to ensure no delays.
At the meeting you will sign all of the documents necessary to transfer title into your name as well as those required by your lender/mortgage broker. Since land titles requires original signatures on all documents being submitted your lawyer will often have multiple copies of the important documents to ensure all necessary parties receive originals. With all that signing it can take up to an hour to finish the meeting with your lawyer. Be sure to ask your lawyer any questions at this point as well.
Pitfalls to avoid:
- Always tell your lawyer if you are planning on being out of town for an extended period of time. Most land titles documents need original signatures. Thus, it can delay your closing if you are no longer in town to sign all the necessary documents. However, planning ahead with your lawyer can solve this problem.
Stage Five – Closing Day
The big day has finally arrived. A whole series of events now occurs in the background at your lawyer’s office prior keys being released to you. Firstly, your mortgage funds are wire transferred from the bank to your lawyers trust account. Then those funds are turned around in the lawyers accounting department and sent back out, combined with your shortfall, to the seller’s lawyer. Simultaneously your lawyer sends down the transfer documents and your mortgage to the land titles office for registration. Once the seller’s lawyer receives those funds in their trust account they can finally authorize the release of the keys. With two banks, two law offices and numerous couriers all coordinating the key release can be slowed by the slightest hiccup in that chain of events. Thus, although possession typically occurs around noon on closing day it is not uncommon for it occur closer to mid afternoon.
If your contract stipulated a pre-possession inspection, your realtor will arrange for that to occur either the day before possession or the morning of the closing day. Once you have possession you should take a quick walk through to ensure the property is in substantially the same condition as when you viewed it. If it is not or something has been removed that should not have been you should contact your lawyer to deal with it as quick as possible.
Pitfalls to avoid:
- Although it may be tempting to arranging your moving truck, utility installation, or other service providers to arrive for the morning of closing day that can be a mistake. If there is a slight issue or hiccup it can delay in any of the intricate closing procedures it can delay your key release by a few hours or, worst case, a day or two. That will mean suddenly needing to rearrange your moving truck or the internet installation on what was already a stressful day. Scheduling these for even a day or two later can save you a world of grief.
Contact a Real Estate & Property Lawyer Today
We hope you found this legal information helpful. Feel free to call us at Morrison LLP at 587-758-1099 if you have any questions about your real estate transaction—the first 30 minutes are free.
Although we are based in Edmonton, our real estate lawyers are proud to serve much of northern Alberta, including the following communities:
- Edmonton & Area – Sherwood Park, Beaumont, Leduc, Fort Saskatchewan, St. Albert, Spruce Grove, Stony Plain.
- North – Athabasca, Morinville, Westlock, Gibbons, Barrhead, Redwater, Peace River, High Level, Fort McMurray.
- West – Drayton Valley, Edson, Hinton, Whitecourt, Devon.
- South – Camrose, Wetaskiwin, Millet, Calmar.
- East – Vegreville, St. Paul, Cold Lake, Bonnyville, Vermillion, Wainwright, Tofield.