Buying a Home London Ontario
A Guide To Buying a House in London Ontario and The Area
Since Adam & Eve went looking for a home, everyone has an opinion on the proper steps and timing when buying a home.
We all have our inner fears, doubts, demons, bravado, ego & advice from well-meaning family members, pretend real estate gurus, 1000’s of books, articles and Google searches; no wonder with the information overload we at times can be confused, scared and distraught or downright not think or act clearly.
Let me add to the confusion!
I quote Morgan Housel in his excellent book “The Psychology of Money.”
” Every decision people make with money is justified by taking the information they have at the moment & plugging it into their unique mental model of how the world works. Those people can be misinformed, have incomplete information, be bad at math, be persuaded by marketing or misjudge the consequences of their actions.”
Every financial decision a person makes; makes sense to them at that moment and checks the boxes they need to check.”
Clarify What You Want.
Take a good look at where you live now. What do you like? Don’t like? Prepare a list of what you want & don’t want in the homes you will view. If you dislike something where you live now, you’re still not going to like it in your new place.
Understand What Each Other Is Looking For, And WHY: If a couple is looking for a home, understanding what you want will eliminate many issues over time. Both of you will understand what the other wants and why. Rank each feature regarding its importance to you and your children; it may not hurt to hear their opinion. Or, as my wife says to everyone if you want Ty’s opinion, I give them to him!
If single, do this as well; you never know when that perfect person will show up and if never, there is no harm in going through the exercise.
For example, a well-designed gourmet kitchen (list all the kitchen features you’re looking for) may rank high with a woman, while having a man cave may rank high with a man. Or vice-versa.
More Dreams than Money?
Understand How Much Home You Can Afford.
Like it or not, there are two guidelines bankers and mortgage lenders use to determine how much loan you can afford. The first guideline is the Payment to Income Ratio. This guideline compares your income, or your total household income, to the amount of mortgage payment you’re considering. To calculate the “payment” part of the formula, the lender will take the mortgage payment (principal + interest) and add it to its property taxes or condo fees. Hence the term “PIT” (principal, interest, taxes).
Usually, lenders will loan up to a payment amount of 28% of your total household income. But before you think you’re home free, there’s something else you need to know.
It’s called the Debt to Income Ratio. Debt refers to ALL the significant monthly payments other than your mortgage payment (PIT). To arrive at this amount, the lender will consider
- Your car payment.
- Your credit card debt.
- Any Revenue Canada liens or payments due.
- Do you have any other payments and debts (boat, second home, etc.)
- Child Support
- Mistress, lover
The Lender will compare your total debt to your ability to make current payments with your home loan added into the equation. Now, here’s the “stickler.” Most lenders have set different limits on your Debt Income Ratio, so it’s critically important to shop around. (I have seen huge differences in rates and terms, ask around) Don’t follow the “canned” financial advice you see on TV. Most of that advice is a “rule of thumb” and designed for the lowest credit rating and highest interest rates.
If you spend two or three days to find a loan that saves you $10,000 to $60,000 over its term, your time is well worth it! Do a little homework on your own, or I can recommend some great mortgage providers that have helped hundreds of clients save thousands over the loan term.
How You Value Homes Will Save You Thousands of Dollars And Heartaches!
People can make a big mistake when buying a home because they rely solely on “local neighbourhood market analysis information” to determine the right price. Buyers rely on information provided by whom? A straightforward question, and I hope you fully grasp this! I believe that historical home values and current prices of sold or not sold are facts, and they should not be confused with anything having the words ‘potential’, ‘should,’ ‘could be,’ or ‘averaging”.
Family, friends, and co-workers, while meaning well, will have opinions and perspectives on what you should do! You will be living there, not them, really think this through. Facts do not lie; the question will be, what attributes determine the price you are willing to pay the home seller? Before you buy a home, insist on seeing a “total market overview” of exactly what is going on in the entire market. Then narrow your analysis to local market information.
Why do I say this? Because you want to know two things: 1) what is the entire market doing with values? Are they going up, and by how much? 2) What is the specific area doing with market values? How does it compare to what the total market is doing? Are the growth rates the same, lower, or higher than the overall market? Understanding these parameters will save you thousands of dollars when you make an offer on the house.
OK, so let’s say you’re now pre-qualified with financing, and you have narrowed down what you can afford, what, and you know where.
The Way You Visit a House for Sale Can Save You Enormous Amounts of Money and Time
It’s now time to find a home that fits your needs and a home that will not be a money pit. Keep in mind the following:
- What is your initial reaction to the house as you approach it from the street? This feeling is called “curb appeal,” and it dramatically impacts the value of the neighbourhood. Is the home situated right on the lot? Notice the areas around the house? Are they well maintained? Is the landscaping groomed?
- Take a look at the structure of the house. As you go through the home, windows and doors should be square and close correctly. Look around windows and doors for cracks. Check corners of rooms for sloping or tile/wood cracks. These may reveal foundation or water problems.
- Now think about the floor plan of the house. Is it functional? Do the rooms flow the way you want them? Are the halls narrow and long, or are they open? How far will you have to carry the groceries from the garage? Are the rooms the right size and height for your desires? If there have been any additions, were they done professionally? Do they fit with the flow and style of the home?
- Now, check the roof and ceilings. What kind of roof is it, when was it last replaced, and is the roof’s slope consistent with our winter climate?
- Now make a basic check of the plumbing, mechanical, and electrical systems. You may be getting a home inspection if you decide on the house, but a cursory review will help save some time.
In the real world, sellers want as much as they can get for their home, and buyers want to spend less than the seller wants; it is essential to know:
How MOTIVATED Is the Seller, And How MOTIVATED Are YOU?
If the house has been on the market for two-three weeks, perhaps it’s because the seller hasn’t been motivated enough to sell or is given false hope by their real estate person. Or, their price reflects their two mortgages, car loans, credit card debt and a few thousand dollars of play money!
There are no offers by now, the house hasn’t sold, and they are very motivated. If you have a job transfer, you have your home listed, you wish to downsize, or your spouse kicked you out, or you left, or you’ve had it with your landlord, YOU may be very motivated to buy!
Try to AVOID Emotional Attachment To the Home, You’re Considering.
If you’re all jacked up about the home, if you can’t hold back your emotions around the house, you could get hurt financially when negotiating the purchase. Another good reason an excellent professional Realtor® representing you during the transaction and acting as the middle person will help save you money.
So let’s say you have someone representing you and are ready to write an offer. What’s the single best piece of information you can have? Other than my phone number, 519-435-1600(I couldn’t resist!), it’s the comparable sales and market data for the entire market and the area.
You want to take a look at three vital “market telltale signs:”
- Take a look at the currently active (for sale) listings. Was the house you’re considering priced within reason to other homes? If so, you know you’re at a reasonable starting point.
- Now, look at the average selling price compared to the listing price. You may notice that most London houses are selling for the asking price or above.
- Make sure you visit several of the other listings in the area. How does your choice compare to the others on the market? Is the home you’re considering in a similar shape? Is it better, sited? Is it bigger, smaller, better style, better landscaping, etc.? These factors will help you determine how much you should pay for your home vs. how much others paid for similar homes in the neighbourhood.
You’re now ready to make your offer. What strategies such as price, date and inclusions are you considering? Are there other offers? What about financing, a home inspection, a survey?
Use A BUYER’S REPRESENTATIVE! (That’s a Realtor!)
Avoid Dual Agency if possible; if you find a home on your own, know that the listing agent represents the seller, not you! It’s true, and you have to ask yourself: “Is this person going to represent MY interests?” Think about this: If you had to go to court, would you use the same lawyer the opposing side was using?
I think you know the answer! But did you know that by creating a “buyer’s representation” with a Realtor, you not only get someone representing you but…
- A buyer’s representative doesn’t cost you a nickel more. Even though they represent you, they are paid out of the standard commission that the home seller has built into their price.
- Buyer representation is straightforward to enter into, but be very careful; buyer representation can be hard to get out of if you are not happy with the Realtor you have chosen. Know what you are signing.
- A buyer’s representative will keep everything about you and your transaction confidential!
Fully grasp the difference of who is representing whom. If more buyers and sellers of real estate understood this, there would be far fewer issues.’ What an excellent real estate person can do to help:
- Knows the area you want to buy in because they always look at homes.
- Be able to spot trouble for you as they daily look at homes and see things you might not see.
- Can simplify the buying process.
- Can provide you with motivated, reliable financing sources and options.
- Can refer you to proven inspectors, lawyers and accountants and other service providers you may need.
Who Are All The Key Players in a Real Estate Transaction?
Buying or selling a home requires more than just the buyer and seller. You’ll also need the services of various home-related professionals, and we can help you find many of the right ones.
Here are the key players in a transaction and the roles they play:
Finding a home to purchase is a big task, and a Realtor can make it a lot easier by doing a good deal of looking for you.
The Realtor’s role is to help you sift through available properties, identify those that most closely meet your requirements, and arrange for you to view them. Ideally, your Realtor is more than a salesperson.
The top Realtors help provide you with Listings AS SOON AS POSSIBLE; they have 2 or 3 systems because we all know that well-priced homes sell quickly. They should serve as a resource person who can provide valuable advice and help you make an informed purchase decision. They will also help you with your offer if they are a buyer’s agent working for you; they help negotiate the offer in the BEST terms for you, the homebuyer.
- A licensed real estate person keeps tabs on the latest properties by tracking the Multiple Listing Service (MLS) and other sources.
- There could be instances when your Realtor may represent the seller when the property is an MLS listing. However, suppose you have already engaged a Realtor to help you find a property. In that case, your Realtor will act expressly and contractually in your best interest and are known as Buyer’s Agency.
- Negotiates terms and conditions of your purchase with the seller’s Realtor or with the seller directly (if a private seller or their listing).
- The seller pays the Realtor’s commission out of the proceeds of the sale. Usually, it is split between the buyer’s Realtor and seller’s Realtor if both are involved.
- Arranges to get information for you or certain conditions to be fulfilled, as agreed with you — i.e. survey, appraisal (for mortgage purposes), and a home inspection report.
- Selecting a Realtor to help you buy or sell a property is something you should take some time doing. A professional Realtor thrives on questions!
The REALTOR® Consumer Relationship
In Ontario, the real estate profession is governed by the Real Estate and Business Brokers Act, 2002, and Associated Regulations (REBBA 2002 or Act), administered by the Real Estate Council of Ontario (RECO). Note: The Real Estate and Business Brokers Act, 2002 (REBBA) will be renamed the Trust in Real Estate Services Act, 2002 (TRESA). Phase 2 legislative reforms will come into effect on December 1, 2023.
All Ontario REALTORS® are registered under the Act and regulate real estate brokerages’ conduct and salespeople/brokers. The Act provides consumer protection in deposit insurance and requires every salesperson/broker to carry errors & omission (E&O) insurance.
When you choose to use the services of a REALTOR®, it is essential to understand that this individual works on behalf of a real estate brokerage, usually a company. The brokerage is operated by a Broker of Record, responsible for the employees registered with the brokerage. When you sign a contract, it is with the brokerage, not the salesperson/broker employee.
The Act also requires that the brokerage (usually through its REALTORS®) explain the types of service alternatives available to consumers and the brokerage’s services. The brokerage must document the relationship between the brokerage and the consumer and submit it for approval and signature.
The most common relationships are “client” and “customer,” but other options may be available in the marketplace.
A “client” relationship creates the highest form of obligation for a REALTOR® to a consumer. The brokerage and its salespeople/brokers have a ﬁduciary (legal) relationship with the client and represent the client’s interests in a real estate transaction.
The REALTOR® will establish this relationship using a representation agreement, called a Listing Agreement with the seller and a Buyer Representation Agreement with the buyer.
The agreement explains the services the brokerage will provide, the fee arrangement for those services, the obligations the client will have under the agreement, and the agreement’s expiry date. Ensure that you have read and fully understand any such agreement before signing any documents.
Once a brokerage and a consumer enter into a client relationship, the brokerage must protect the client’s interests and do what is best for the client. A brokerage must strive for the beneﬁt of the client and must not disclose a client’s conﬁdential information to others.
Under the Act, the brokerage must also make reasonable efforts to determine any material facts relating to the transaction that would interest the client and inform the client of those facts.
Although they represent their client’s interests, they must still treat all parties to the transaction with fairness, honesty, and integrity.
A buyer or seller may not wish to be under contract as a client with the brokerage but would instead be treated as a customer.
A REALTOR® is obligated to treat every person in a real estate transaction with honesty, fairness, and integrity. Still, unlike a client, it provides a customer with a restricted level of service. Services provided to a customer may include showing the property or properties, taking customer direction to draft an offer, presenting the customer offer, etc.
Brokerages use a Customer Service Agreement to document their services to a buyer or seller customer. Under the Act, the REALTOR® has disclosure obligations to a customer and must disclose material facts known to the brokerage that relate to the transaction.
What Happens When?
The buyer (s) and the seller(s) are sometimes under contract with the same brokerage when properties are being shown or an offer is being contemplated. There can also be instances when more than one offer on a property and more than one buyer and the seller are under a representation agreement with the same brokerage. This situation is referred to as multiple representation or dual agency.
Under the Act, the REALTORS® and their brokerage must make sure all buyers, sellers, and their REALTORS® conﬁrm in writing that they acknowledge, understand, and consent to the situation before their offer is made. REALTORS® typically uses a Conﬁrmation of Co-operation and Representation form to document this situation.
Offer negotiations may become stressful, so if you have any questions when a reference is made to multiple representations or offers, ask your REALTOR® for an explanation.
REALTORS® are obligated to disclose facts that may affect a buying or selling decision. It may be difﬁcult for a REALTOR® to judge what facts are important, and they also may not be in a position to know a fact.
It would help if you communicated to your REALTOR® what information and facts about a property are vital to you in making a buying or selling decision, and document this information to avoid any misunderstandings or unpleasant surprises.
Similarly, services that are important to you and are to be performed by the brokerage or promises that have been made to you should be in writing and documented in your contract with the brokerage and its salesperson/broker.
To ensure the best possible real estate experience, make sure your REALTOR® answers all your questions. You should read and understand every contract before you ﬁnalize it.
Note: All the reasons why it is crucial to work with a Realtor in Ontario. For sale by owners (FSBOs) who are selling their home do not have to comply with the regulations that a Realtor does, so caveat emptor (the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.)
Your lawyer makes sure that the property you purchase is legally yours and comes with no strings attached.
When you buy property, you are not just buying the land and building; you are also accepting the legal rights of ownership, so you need to be confident that no other party has a claim to them. Your lawyer will confirm no legal obstacles to your purchase and help it proceed smoothly.
- Conducts a title search to ensure that the seller is the property’s valid owner, ensuring that the current or proposed occupancy usage conforms to local by-laws.
- Obtains all necessary documentation, including:
- Compliance Letter acknowledging that no outstanding liens (legal claims) or work orders are in effect
- Tax Department release verifying that property taxes are up to date
- Will handle the transfer of ownership from the seller to the buyer and the mortgage’s registration on the title.
- Ensures arrangements are in place for funds to be available for closing.
- Coordinates with lenders the setup of legal documents for any mortgage security.
- Ensures that all mortgage terms and conditions are fulfilled, and that title is clear to make undertakings to the lender(s). May obtain title insurance on your behalf if there is an issue surrounding the title that may cause a claim or work order of some kind in the future.
- Arranges for the signing of legal documents and the submission of remaining funds.
- Coordinates closing the purchase transaction with the lawyer(s) for the seller of the property.
- Read this Report: The role of a Lawyer in a real estate transaction.
The mortgage lender is the financial hub in your real estate venture and can either work for the Canadian banks or be a mortgage broker who has access to the big banks and secondary lenders.
It pays to shop around in today’s mortgage market because there are many lenders, different financing options, and fees! Save yourself some time and trouble.
Appraisers assess property value for the lender.
When purchasing a property, the lender must be satisfied that the price reflects its actual market value. An appraiser is an officially accredited evaluator hired to inspect the property for the lender to assess and certify its value.
- The lender provides an accredited opinion about the property’s market value (to be) purchased compared to the purchase amount.
The Home Inspector acts as your extra pair of eyes, seeing things about a property that may not be visible to you.
If you are buying a resale home, it’s always advisable to have it checked by a Home Inspector as a purchase condition. This individual (not requiring provincial licensing in most cases) will inspect the property for significant deficiencies, which may not always be apparent. The results are presented in a written Home Inspection Report. See this report on choosing a home inspector and why!
The Home Inspector:
- Identifies the soundness of the structure and any improvements that have been made.
- Notes any specific deficiencies and their impact on the value of the property.
- Estimates the cost to correct any identified deficiencies.
Note: There can be many other professionals or non-professionals involved in your real estate transaction. An excellent, thorough Realtor will ensure you are working with qualified professionals.
Warning: Here Comes a Sales Pitch!
I hope the information above has given you some helpful ideas and things to think about when finding and buying a home? Now, some self-promotion.
Before even looking at homes, we will:
- Listen to your needs and desires; we will not try to convince, persuade or ask you to sign anything!
- Highlight various neighbourhoods to determine which ones are best suited to your needs.
- Allow you to evaluate whether we can help you or not; if you feel we are not the right fit for you, off you go, you are under no obligation whatsoever.
- Assist you in pre-qualifying for mortgage purposes if required.
During the Search for the Right Home, we will:
- Launch our detailed High Energy Home Buyer Program action plan;
- Keep you informed of daily updates on newly listed properties that meet your needs.
- Ensure we are available to you for offers, questions and concerns and not passed on to an assistant or an inexperienced Realtor.
At the Time of Offer, we will:
- Prepare and review the Offer to Purchase;
- Explain all conditions and special clauses;
- Represent you in presenting the Offer;
- Present the offer and handle negotiations until we have an agreement.
When we have a Conditional Sale Agreement, we will:
- Ensure that all documents required by your Mortgage Provider are signed and provided.
- If required, assist you in choosing a lawyer to represent you for a smooth and successful closing.
- Assist you in choosing a reputable and professional Home Inspector; if so, we will be there with you at the home inspection.
- Monitor that conditions are completed promptly (inspections, mortgage financing, etc.)
Once we have a Firm and Binding Agreement, we will
- Ensure that all documents required by your Lawyer are signed and provided.
- Arrange for a final walk-through 2 or 3 days before you take possession to ensure what you bought is still there and in the same condition.;
- Arrange for keys and other necessary items such as garage door opener, mailbox keys, etc.
These are only a few of the things we discussed with you before, and during the buying process, there are 92 items we cover. Sound like a lot? It is, but the way we see it, if you are paying hundreds of thousands of dollars for a property, it is imperative to protect yourself, your family and your future.
Where can we help you?
The Envelope Real Estate Group covers London and South West Ontario. We are licensed in the Province of Ontario and can refer you to our network of qualified real estate professionals across Canada, Florida, California, Arizona, and North and South Carolina!
What Will It Cost You?
99.8% of the time, we are paid by the listing real estate brokerage, disclosed to you upfront in writing and verifiable. No retainer fee or upfront fees are required; we only get paid once the property you choose has changed hands. I call it our success fee! We get paid after you have successfully and happily purchased a property.
Why Us and Not The Other 2300 + Realtors in London and the Area?
- We work exclusively for you (the buyer) while the listing agent works for the seller. If you were to approach a listing agent, they would represent the seller, not you. Lawyers cannot work for the buyer and the seller on the same property for a reason; why should Realtors be able to?
- We are your eyes and ears in the London, Ontario, real estate market. We take as long as it takes to understand your individual needs by creating a personalized “property profile.” We know about all the homes for sale, be it private, MLS or exclusives and for sale by the owner.
- Our network and long-standing relationships with lenders, lawyers, financial advisors, appraisers, trades, and realtors continually expand.
- We will give you an objective and an unbiased view of a property’s actual worth backed up with documented research of the current market and trends.
To Buy a Home in London, Ontario, Who Gets The Biggest Bang For Their Dollar?
The biggest bang for their dollar goes to the buyer who has the first opportunity to say yes with conviction! And, who is that buyer?
- The buyer who has identified their needs, not their wants
- The buyer understands that buying a home is a process, not an event! In other words, they keep their emotions in check and know that opinions from family, co-workers & friends, though well-meaning, may not be accurate or current.
- The buyer who knows what questions to ask & is aware of all the facts ends up with the home that matches their budget and needs.