The Real Estate Council of Ontario did a survey of first time buyers in Ontario and found that one of the top issues that buyers had was they wished they understood the real estate contract and the process involved in buying a home a lot better, before they bought their home. Here are 5 things to know so that you will not be surprised either before or after closing.
1. How much is the bank really lending me?
When you go to your lender to arrange financing, many buyers wrongly assume that if you are borrowing $300,000, then that is the amount you will receive on closing. Not true. In many cases, the lender may deduct a mortgage processing fee, which can be approximately $250. If the lender is paying your property taxes, they may deduct an amount right off the top in order to create a tax account for you, sometimes up to an additional $1,000. If your closing is for example on January 10, 2015, and your first payment is March 1, 2015, then the lender may deduct in advance interest from January 10, 2015 to February 1, 2015. Finally, if you are using CMHC or Genworth to obtain insurance for your mortgage, for example if you do not have 20% of the down payment, then not only will the premium be deducted from the principal amount of your mortgage, but an additional 8% PST will also be deducted on closing. Buyers often tell me that the PST charge was not explained to them by anyone. Ask your mortgage broker or lender in advance about all of these potential charges so you are prepared for what you will have to bring in on closing.
2. What does “more or less” mean when they are discussing the frontage and depth of a property, or the square footage?
What this means is that if there is an error in the dimensions or square footage up to 5%, a buyer can typically not complain about it after closing. If the boundary lines matter to you, make the deal conditional on your receiving an up to date survey that demonstrates the actual boundary lines. If the square footage matters, arrange to hire a professional to measure it for you. Most offers contain a disclaimer that the seller does not warrant anything anyways so you need to protect yourself if this matters to you.
3. The seller told me the counter tops were made of granite but I found out later they weren’t; can I sue after closing?
The answer is usually no, since the fine print indicates that if it is not in the Agreement, it didn’t matter to the buyer or the seller. Therefore, if anything about the property does matter to you, whether it is any feature or item contained in a listing, be sure to include it in your agreement of purchase and sale as well.
4. I bought and sold my home on the same day. Even though I was packed up at 1 pm, I could not get into my new home until 6 pm, meaning that I had to pay the movers for an extra 5 hours. Can this be avoided?
This can be a real problem, especially at the end of the month. The safe way to avoid this is to close your purchase a few days early and obtain bridge financing so that you can move when it is convenient for you. The interest you will pay to do this is much less than what you will pay movers to wait around.
5. I don’t agree with the terms of the furnace rental contract. Can I just cancel it?
Unfortunately, the answer is usually no, unless you are prepared to pay a penalty. In the fine print, the buyer agrees to assume every rental contract that is disclosed. Before you sign, ask for the details of any rental contract in advance so that you are aware of what it will cost to either assume the contract and continue making the payments or the cost to cancel it after closing.
When you understand the fine print and the process before you sign any real estate agreement, you should not receive unwelcome surprises later.
If you have any stories to share about how you were affected by the find print, or just need some advice, please contact me at firstname.lastname@example.org.
About Mark Weisleder
Mark is a lawyer, author, instructor, Toronto Star columnist and keynote speaker for the real estate industry.