Accepted offer, Now What Happens?

You just got the call, they accepted your offer! Woohoo! You jump around for a few minutes but when you calm down you need to realise you are on the clock – you have deadlines to meet or you could lose the house to someone else!

  1. Inspection

Have your home inspected by a professional, not uncle Bob who once renovated a home! Hire an inspector that is approved by the Real Estate Board (OACIQ Organisme d’autoréglementation du courtage immobilier du Québec). Make sure he is insured. Best way is to ask your Real Estate Broker for a list of inspectors from the area you are purchasing in. These inspectors will know the issues relate to the neighborhood you are buying in, like iron ochre or pyrite.

Have the chimneys inspected, if there is a septic system ensure it is in good working order and have the owner clean it prior to closing. Heating systems should be inspected as well.

Understand that inspections are for you to find out about the house and to verify there is not a major structural defect(s).  A building inspection is not done so you can re-negotiate with the owner to fix small issues. In most cases you are not buying a brand-new home, maintenance and small issues are to be expected. What you are on the look out for is major issues that could significantly reduce the value of the property, approximately 2-3% of the value of the property. If something large is found, you have a few choices.  You can walk away from the sale, have your broker try to work out a fair price deduction for the work required or have the owner repair the issue.

Make sure you understand the deadlines in the offer. If in your Promise to Purchase you have a delay of 7 days for your inspection, it is 7 days not 7 business days. In Quebec there is no such thing as business days in real estate contracts. On standard OACIQ Promise to Purchase forms there is a second deadline to know about. First, you have the delay to actually do the inspection ie 7 days (whatever time frame you put in the offer), second you have another 4 days fixed to review the report and waive the inspection or render the offer null and void. So, in reality the condition is 11 days total. You must do the inspection within the first deadline (ie 7 days) not the second (4 days).

Should you require more time to bring in other inspectors, the original 7 days can be extended if both parties agree. Do not wait until day 7 ask for an extension because if another offer comes in on the property the owner could just say no to an extension and you are left making a hard decision whether or not to accept a home that might have issues or not.

The deadline will expire itself, meaning if you do not notify the sellers within the allotted time, it is deemed that you have accepted the building inspection and waived the condition.

  1. Finance Letter

The next phone call you will make is to your mortgage lender, of course you were pre-approved, so this step is easy! Send the mortgage lender the information on the house, as they will now want to approve that the house is worth what you are paying for it. They will require the detailed real estate listing, certificate of location and the full offer with seller’s declaration. The lender will also finalize your personal documents and verify proof of down payment again. Often the lender will spend an appraiser to evaluate the home. This alone is a 2-3-day process and is only done once the lender is satisfied with all other documents. You do not need to be present for the appraisal visit the evaluator will contact the real estate broker directly to arrange a visit.  With a deadline of 10-12 days there is no time to dilly doddle!

If you didn’t get pre-approved, get ready to run to find all your paperwork and get it to the mortgage lender. Ask your real estate broker for a referral, even within your own bank as the back-door rates with your brokers contacts are usually better then what you can get through the front door.  Time is of the essence so don’t delay. Using your brokers contact, also insures that the broker will be kept informed of any delays or hiccups along the way and can react faster.

The finance condition deadline is set out in the negotiations, if the condition is 7 days for example; the condition starts the day after the offer was accepted as day 1 and ends at midnight on the 7th day. With this condition if buyer has not given proof of financing by the deadline the seller has the choice within in 5 days to make the buyer file for a loan at the seller’s bank or render the offer null and void by written notification.

  1. Sellers Conditions

The main condition for the seller is providing an up to date Certificate of Location. The Certificate is a map of property with all the buildings on the lot, it states any servitudes or encroachments. A surveyor will take about 3 weeks to make a new certificate so hopefully if the seller requires a new certificate he ordered it when he listed the property. If not, as long as it is ready prior to signing and there have been no changes that effect the titles (ie. Encroachments on a neighbour’s property) the sale can proceed as normal.

If you are buying in the country area there are other conditions in your Promise to Purchase that the Seller is responsible for. Namely having the and septic tank cleaned, and the system verified in good working order. If the property is service from a well the seller will also be responsible to provide proof of potable water. As you have hired an experience real estate broker he/she will be aware of these situations and advice you accordingly.

  1. Firm Offer!

You made it, you met all your deadlines! Now on to the less stressful steps.

  1. Hiring a Notary

Again, speak to your Real Estate Broker and get a list of the local notaries. They know the area and can advise you accordingly. The notary will contact your bank and handle the transfer of funds, he will do a title search on the property and work with your real estate broker regarding the documents. Remember in Quebec the notary must have the funds free and clear in their trust account 48 hours prior to the sale. For your down payment, wire transfers are the safest way, as a certified cheque can be held by banks for days.

On your Promise to Purchase you have agreed on a Closing date, the fine print says, ‘on or before’ this means you can sign on the day or a few days earlier. Occupancy remains the fixed date in the offer but signing can be moved forward to comply with everyone’s schedules.

The notary will have you come to his/her office a few days before the transaction to sign your mortgage papers and to go over the sale and adjustments. The adjustments are the balancing act of the municipal and school taxes, propane and/or oil tank, condo fee, basically the fixed costs that are attached to the property. The Seller will have to be up to date on all of his bills and then the notary will charge you the balancing days of the paid bill. For example, if you buy on December 1st you will have to pay the seller the taxes for the month of December as he has already paid the municipality for the month.

  1. Home Insurance

The mortgage lender will demand that you have property insurance on the home as of the closing at the notary’s. The notary will request a letter from your insurance company before the Title Deeds are signed. Ask the seller who they use for insurance, it might be easier to stay with the same company.

  1. Little Things

Hydro, make sure you call Hydro and let them know you are moving. There is also the cable company, internet etc… A good thing to do is take a reading of the hydro meter when you first arrive at your new home and give the number to Quebec Hydro to ensure there are no extra charges.

Now you just have to pack everything you own, stick it a truck and meet it at the new house!

**The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.**

 

 

Conditional offer How does it Work?

Shopping for a new home before you have sold your first house can be frustrating. You see a house that would be perfect, but you can’t buy before you sell yours. A conditional 72-hour clause in your offer is a solution.

Clause R2.1 of a Promise to Purchase states that the Promise to Purchase is conditional to the buyers selling their present home within a time period (30,60 or 90 days usually). They must fulfill all other conditions of the offer, do their building inspection and get a bank approval letter for their mortgage (conditional to selling their present home) so the only conditions remaining on their offer are selling their home, presenting an unconditional bank letter and of course the signing of the deed of sale.

While the buyers work at selling their home, the seller holding the ‘conditional offer’ doesn’t want to put all his eggs in one basket, he wants to try and sell his house to someone else that doesn’t have to sell their house to buy his house. To be able to do this the Clause R2.2 must be ticked in the offer. This clause allows the seller to continue to actively market his home and look for another buyer.

Should the seller receive another offer he deems acceptable, whether it Is a higher or lower price than the first offer, he can accept it conditional to the first offer falling through.  The second buyers would then have to fulfill all their conditions, building inspection, finance etc.. Once all the second offers conditions have been waived, other than the notary signing, the sellers must turn to the first offer and give them 72 hours to remove the condition of selling their house and present a non-conditional finance letter OR render their offer null and void. The 72 hour time frame commences as soon as the first buyer receives a time stamped telegram or a time stamped hand delivered amendment. It doesn’t matter if it is a Friday night or on the weekend, the 72 hours starts as soon as notice has been received.

If you are the first buyer with a conditional offer on a home, the first thing I suggest you do when your offer is initially accepted is to speak to your bank to see if you could buy without selling your home if you received a 72 hour notice. Could you afford a bridge loan? Two mortgages? It’s better to know ahead of time to avoid panic and scrabbling when you receive the 72 hour notice. Especially as the notice time could be when the banks are closed over the weekend.

For the second buyer, he must take a risk when there is a conditional offer already on a house. He has to invest money in a building inspection, get his mortgage approved and then sit and wait to see if the first buyer can get financing without selling their house or sell their house by the end of the 72 hours. Many buyers don’t want to go through the trouble unless it is their dream house, or they believe the first buyers can not fulfill financing without selling.

As a seller whose house is just new to the market or the market is hot, conditional offers are not ideal. A home that has been on the market for awhile it is a good option though. Sellers usual are not as negotiable when dealing with conditional offers, as they feel it is more like a first option to buy than a firm offer. So, when a second offer comes along that has normal, finance and building inspection conditions they often accept less money as they feel it is a real offer.

Be that as it may, you still have first dibs at the house and if the bank is willing you can get the key to your dream home! In the time from acceptance to the signing at the notary you may have the time to sell your present home, if the price is right!

Conditional offers are very common in a buyers market and could be the right option for you to get your dream home if handled properly!

**The foregoing provides only an and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.**

 

Questions to Ask at Open Houses

Open houses are a great way to pack a bunch of home visits in on a Sunday afternoon. It is like window shopping for houses. However, you should go with a list of questions to ask the listing broker if the home interests you. Here are some questions worth asking;

  1. Why are they moving? This tells you how motivated they are to sell.
  2. When do they want to move? Would they prefer an offer that gives them time to find another house or a quick occupancy? Often a vendor will accept a lesser price if the dates are perfect.
  3. Have there been offers on the home before? The broker can’t legally tell you the price of the other offers, but they can tell you if there has been any and if the offer died on building inspection, why.
  4. What was the original list price on the home? How long has it been on the market? Is this the first contract or was it listed with another broker before? These will help you know if the home is priced correctly, are the owners dreaming of an unrealistic price, have they finally woke up and are ready for reality?
  5. What are the heating costs? If the costs are high it could be a red flag for insulation issues, however everyone heats differently, they could have just turned the heat up for the open house!
  6. Are there any known issues with the home? Ask for a copy of the Seller’s Declaration – Mandatory document in Quebec, it states everything the owner knows about the property’s condition.
  7. How close are the parks and services? Location, location, location. I can not say it enough you can fix any house, but you can’t fix a location!

Be prepared to answer so questions too! The listing broker has an obligation to give their vendor feedback from the day! Think about it you are going into a stranger’s house walking around to see if you like it, its their personal space, they should be able to have some feed back from you. Also fill out the sign in sheet. If you are worried about the broker doing a hard sell, don’t give all your contact info but your name would be nice. If the house was yours that the broker was trying to sell wouldn’t you want him/her to do their job correctly?

Here is what most brokers will ask you – be prepared!

  1. Are you working with another broker exclusively? This is important for the broker to know, ethically brokers don’t like step on other brokers toes! Tell the broker when you walk in that you are working with Tania from Royal LePage, the broker will appreciate it. The broker will call your broker for feedback from the visit and leave you be!
  2. Are you from the area? This lets the broker know if they should give you some area information.
  3. When are you looking to buy for? This just helps the broker know where you are in your search and if you are more on a scouting visit or a serious ‘let’s find a house asap’.
  4. How do you feel about the house, compared to others you’ve seen, its price? This helps the broker give constructive feedback to the owner.
  5. Are you considering making an offer on this home? Ok sounds pushy but it’s the brokers job to sell the house! Again, if it were your house on the open house, would you was the broker to ask everyone! Law of averages says, ask enough and your bound to get one yes!

Brokers do open houses every Sunday, you will probably see the same broker in the weeks to come at another property. They know the area, they know the market, so use them for their knowledge. Don’t run into an open house and treat them like a vulture you must avoid! They are there to help!

**The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.**

Quebec Real Estate Practices – Different from the Other Province’s

Quebec has its own set of rules

When buying a house in Quebec, the first thing to know is: “You know nothing” (John Snow). Ok, yes, I watch Game of Thrones! Seriously, you don’t know much though! The rest of Canada follows Common Law whereas here in Quebec, we have our own rule book – The Civil Code. Very generally speaking (since I am not a lawyer), Common Law is case law and Civil Law is codified statutes.

On top of that, we have very tough Real Estate Laws and a fierce regulatory body call the OACIQ, which oversees all real estate brokers. The OACIQ – Organisme d’autoréglementation du courtage immobilier du Québec (loosely translated as the Self Governing Organization of Quebec Real Estate) has as its mission “to protect the public by overseeing the profession adequately and ensuring quality real estate and mortgage brokerage in Québec.” It’s better know by brokers as the real estate police!

Oh, and there are no real estate agents in Quebec – we are either Real Estate Brokers or Chartered Real Estate Brokers. While both are qualified to guide you through the process of buying or selling a property, Chartered Brokers (like myself) have taken extra legal and business courses so that we can manage a Real Estate Agency (not Office – Agency). However, a Real Estate Broker, Chartered or not, is not authorized nor qualified to give legal advice.

More important than the different names are the different laws and regulations. The OACIQ has created mandatory real estate procedures and forms for every situation, in order to protect both the buyer and the seller. Brokerage Contracts and Promises to Purchases (offers) are standard forms, so no party can write up their own version of an offer form. The Promises to Purchase are legally binding contracts that don’t require lawyers to be involved. When a Promise to Purchase is accepted and all the conditions are removed, the paperwork will be sent to a notary who acts for both parties – neutrally – to finalise the sale.

When you are in negotiations and setting deadlines for conditions, be aware that in Quebec, there is no such thing as ‘Business Days’ vs ‘Calendar Days’. In Quebec, days are just days! Sundays and holidays are just days like any other.

The Notary

Who gets to choose the notary? The notary is decided on in the negotiations in the Promise to Purchase, although it is usually the buyer who chooses. The notary does the title searches and reviews the documents to ensure all is in order, verifies that all taxes are up to date, organises the mortgage with the buyer’s bank and disburses the proceeds. Then, everybody gets to pay the notary! The buyer usually pays the most, on average $1000. The cost to the seller depends on the number of liens (legal mortgages/hypotecs) on the property. Generally, it’s under $500, but it depends on the notary.

Getting the non-mortgaged money to the notary is also important. Be aware that the funds must be in the notary’s trust account 48 hours before the signing of the deeds. This means free and clear in the account; surprisingly certified cheques are held by banks for days!  A bank transfer is usually the best way to get your money to the notary quickly and safely.

Occupancy Dates

In Ontario and other parts of Canada, when you sign and pay, you get the keys immediately – not in Quebec! Here you sign, pay, activate your insurance and then let the seller live in the house for another 2-4 days! The seller needs to wait two days for his proceeds to clear from the sale so that he can pay for his next house. Then he lets the other seller do the same thing, hence the 4 days. To compensate you while you wait the seller will continue to pay for the taxes until your occupancy date. Most out of province buyers are amazed by this delay but it all comes back to the registry office. The notary must register the new deed of sale at the registry office to make it official and the delay allows to notary to ensure there are no outstanding liens against the property. A lien registered against a house would make it impossible for the vendor to sell, so this delay decreases the chances of this happening. Don’t worry – in all my years as a real estate broker, I have never seen this happen. If it did, the notary would advise you of the steps to follow.

 The Welcome Tax

So, congratulations you bought a house! Did you notice there were no transfer duties or taxes paid at the notary’s office? That’s because in Quebec, we let you move in, start enjoying your new home and then send you a whopping “Welcome Tax” bill six weeks later!

It is a transfer tax but it is better known as the Welcome Tax, in reference to the Minister of Municipal Affairs who introduced it: Minister Bienvenue (or Mr. Welcome in English). The tax amount can be very high so make sure you are prepared for the bill as you only have 30 days to pay it.

The Welcome Tax is calculated in two steps:

The ins and outs of transfer duties are set out in An Act respecting duties on transfers of immovables (the “Act”).

The amount is always based on the higher of three amounts:

  1. The final sale price of the property (excluding GST PST if applicable)
  2. The municipal evaluation at the time of its transfer. Some cities even multiply the base number (sale price or evaluation) by 1.01 or even as high as 1.11 to create the final taxable amount.
  3. The amount of the consideration stipulated in the act of sale, if different from the price paid (e. in a Gifting situation)

Then the tax is calculated as follows:

0.5% on the first $50,000

1% on the amount from $50,000 to $250,000

1.5% on the amount from $250,000 to $500,000

2% on the amount over $500,000*

So, for example, a property with a tax base as 350,000 would be taxed

$250 on the first $50,000

$2000 on the next $200,000

And $1500 on the extra $100,000

Totaling $3750 to be paid within 30 days of receiving the bill. Welcome to Quebec!!

These are just a few of the more important aspects of Quebec Real Estate Law, your Real Estate Broker will keep you informed and ensure your transaction goes smoothly.

*For attached properties in the City of Montreal,

 a rate of 2.5% is applicable on the basis of imposition which exceeds one million dollars.

**The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.**

 

9 Traps to Avoid

Whatever angles are considered, the purchase of a house is a major investment in your life. For many buyers, it could be a process that will be more expensive than it should because many of them will get into it head first and will fall into traps such as:

  • Paying too much for the house they want;
  • Losing their dream house to the hands of another buyer;
  • And (this is the worst), buying a house that does not correspond to their needs.

Buying a house using a systematic approach will help you avoid falling into these frequent traps. Not only it will save you money but also you will buy the house that really meets your requirements. This rubric presents the 9 most common and expensive traps. It will inform you on how to identify them and how to avoid them.

Buying blindly

What price should you offer when filling an offer to purchase? Is the asking price too high or does it seem to be a good investment? If you did not do any research on the market to assess the value of similar houses, you will make an offer blindly. Not knowing the market conditions might lead you to offer too much or you might miss an opportunity to make a competitive offer on a house that is a really good deal.

Buying the wrong house

What are you looking for in a house? A simple question that might lead to a complex answer. Too often, buyers get excited and overwhelmed when buying a new property and become an owner of a new house that ends up being too big or too small. Maybe the travel distance to work is too long or more important repairs than expected are needed. Take the time to define your needs and your expectations. Write everything down and use this list to assess each house for sale you will visit.

Legal Problems

Make sure that you will obtain the irrefutable proof that the sellers own the house right from the beginning of the negotiation process. Make sure also that the house is not mortgaged and free of any other type of legal lien and that a title search will be performed. The last thing you need to discover is that there is a legal hypothec on the house or other type of priority lien, or you find out there are other owners in the picture or leases were already granted.

Non-compliant designation

In your offer to purchase, make sure you request a current certificate of location that describes accurately the limits of the property. If this document is not the exact reproduction of the actual reality, for example, if the expansion of the balcony or the addition of the pool is not there, this certificate will not be accepted by the bank. Be very clear and firm on these issues.

Repairs not mentioned

Don’t expect the seller will provide you with a comprehensive list of everything that needs to be verified or repaired. You as well as the seller expect to maximize the investment. Make sure you perform a thorough inspection of the house quite early in the process. Consider hiring an independent inspector who will examine the house objectively and ensure the purchase contract is conditional to the results of the inspection. The contract should include in detail all the elements of the house and all the required repairs.

Not being pre-qualified

A pre-qualified mortgage is fast and easy to get. And free. When you’re pre-approved for a mortgage, you take the stress away while you shop and you feel more secure knowing that you will be ready to move when you’ll find your dream house.

Contract defaults

If a seller does not comply strictly to the contract by neglecting to do repairs he/she promised to do, or by changing the nature of the contract in any way, this can lead to the postponement of the signature. Agree on a compensation amount ahead of time if, for example, the repairs are not completed as expected. Prepare a list of items both parties agreed on and follow up closely on each of the items.

Hidden Costs

Make sure you identified and found all the costs resulting from the sale – small or big – as early in the process as you can. When a transaction is concluded, sometimes unexpected fees suddenly “appear” after the total amount has been established: discharges, contributions, etc. Ask the seller to indicate in writing the total costs and charges for which you are responsible.

Rush the signature

During this step, it is crucial you take your time and insist on analyzing all the documents the day before the signature. Make sure the documents reflect your understanding of the transaction perfectly, that nothing was added or removed. Is the interest rate exact? Everything has been covered? If you rush through it, you might end up in a dead end at the last minute and with no solution at hand, you might compromise the transaction.

Divorce

HOW TO AVOID COSTLY ERRORS RELATING TO THE HOUSE WHILE IN A MIDDLE OF A DIVORCE?

With divorce comes the weight of emotional difficulties and important financial decisions that need to be managed properly. One of the most important is the one relating to the house.

In the emotional turmoil and worries concerning the assets that divorce brings, you particularly need clear, precise and objective answers about your real estate wealth. The decision making process will be easier once you are informed of what can happen with the mortgage, taxes and all issues related to the house. The advice of a third party, neutral and well-informed will help you make rational decisions rather than emotional decisions.

The first question you might want to ask yourself is: “Do I want to continue living in the house?” Will your neighborhood be a source of comfort or painful memories? Do you prefer minimizing the disruption or moving to an area which would lead to a new beginning?

Only you can answer these questions, but regardless of the answers, the financial impact must be considered in the decision making process. What can you afford? Does your “new” budget allow you to keep the house? Can you re-open your mortgage to negotiate refinancing? Is it better to sell and buy something else? What can you buy with your new budget?

The goal of this document is to help you ask the right questions in order to make informed decisions that correspond to your new situation.

4 OPTIONS

It is important to understand the financial impact of each of these scenarios.

Sell the house and share the profits

Your main interest in this option is to maximize the selling price of the property. We can help you avoid the errors which owners often make in your situation, and which compromise the expected results. While you are trying to put some order in your situation, make sure you set the net profit you expect to earn. After the expenses related to the sale and after establishing how profits will be divided, what will be left? The division of profits might not be equal because the judgement of divorce might have set a different arrangement or the cash deposit was different or because the laws in effect related to family patrimony would influence the process.

Buy the portion of your spouse

If you have the intention of keeping the house, you will have to determine how you will honour your monthly obligations with one income. If you qualified for the mortgage with two incomes, it might be difficult to refinance with only your income.

Sell your portion to your spouse

If you leave, you can start over with some cash in your pocket. However, you have to know that the existing mortgage loan is still in effect and you will remain, with your spouse, because you both signed for the loan, jointly responsible. This responsibility towards the prior loan can prevent you from obtaining a mortgage if you buy another house even if in fact you are not legally the owner of the first house anymore.

Remain an owner

Some divorced couples will postpone the decision of the sale of the house for a certain time even if one of the spouses continues to live in the house. This situation will give you some breathing room and take away some worries, but requires vigilance given tax rules. Keep in mind that at the date of the sale, your situation relating to your income tax return might have changed.

When you decide to sell
If you and your spouse decide to sell the house, make sure you obtain the services of professionals to get the most from this important asset. Your differences must be put aside and you should get involved in the brokerage contract.