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Real Estate Content
INFORMATION ABOUT RESIDENTIAL REAL ESTATE
SELLING REAL ESTATE
Preparing to Sell:
Legal Matters:
Condos: Additional documents and requirements
TIP: One of the most common selling mistakes is to make major renovations before a sale. Pouring thousands of dollars into renovations does not result in an equivalent increase in the market value of your home.
Some renovations are generally considered as“good” while others are considered as not so good in terms of a return on your investment. You need to know which is which before jumping in with both feet.
EXAMPLE: Making your home more energy efficient means your buyer saves on heating and cooling costs. However, this renovation will probably not return more than 30 to 50 percent on your investment.
Improvements you Should Consider:
-Inexpensive cosmetic improvements, such as repainting, are always your best bet.
-If interior or exterior structures of your home need improvements to make it saleable, then larger renovations may be worth the time, money and hassle.
Help is available:
- If you are thinking about renovating, you should speak to your real estate agent. If you aren’t using an agent, a good place to go for information is the Canada Mortgage and Housing Corporation (CMHC) or the Canadian Home Builder’s Association. Both organizations offer many products dealing with home renovations, and have plenty of free information available on their Web sites.
- www.cmhc-schl.gc.ca
- www.chba.ca
Enhance the exterior of your home and yard
Here is a checklist of tasks to help you enhance the exterior of your home and yard:
- Clean out the garage, and move any large, infrequently used items into storage elsewhere.
- Clean windows, shutters, eaves, doors, and mailboxes.
- Replace damaged window(s) or door screens.
- Do any necessary repairs and touch up paint.
- Trim hedges, trees and shrubs; rake leaves; mow the lawn; weed gardens; tend to flowers.
- Clean oil marks and stains off the driveway.
- Ensure the garage door opener is working properly.
- Clear and clean paths, patios, and patio furniture.
- Make sure your house number is visible from the street.
- Pick up all junk mail regularly.
The open house is your home’s big day. The basic idea is that your home is open for showing on certain designated days (usually during the weekend).
Advantage of having an open house:
- An open house may cut down on the number of private showings you have to give, thereby reducing the disruption to your daily life.
- Also, many buyers feel more comfortable and leisurely being “one of the crowd,” rather than touring on their own.
TIP: Your home should be at it is best on the day of the open house.
Whatever you do at the open house, here are some basic rules to observe:
- Do not negotiate the price verbally.
- Be firm that you will seriously consider all written offers.
- A good standard response is, “We’ve enjoyed this house, but it is time to move on.”
- Do not indicate you are under time pressure to leave.
- This gives potential buyers an edge when negotiating.
there are a number of economic factors to consider before one takes the steps to the sell his/her home. there are a few steps in the middle of the selling process that may shrink your profits from the sale. this section will discuss the expenses that you are responsible for as the seller of the property.
1) Agent Commission
There is a very good chance that you require the services of an agent to assist you with the sale of your home. Your agent receives a commission when you sell- usually a percentage of the sale price- as does your buyer’s agent, and YOU are responsible for both! A typical total commission expense might be between 4 to 6 percent of the selling price, but rates are negotiable.
Note: If you decide to sell privately, you will probably still deal with buyers who are using an agent, so you may get stuck with some commission fees not matter what.
2) Legal Fees
The sale of a home requires complex legal documentation. (Insert Pamphlet material)
From my experience, the closing cost will be anywhere from $700.00 to $950.00.
3) Repairs or renovations
Most homes generally will not require major renovations to ensure a sale. If you have kept your home in a fairly good shape or if your home is relatively new, you may need to do only repairs and touch-up work.
However, bear in mind that first impressions go a long way and regardless of how new your home is, you should pay attention to cosmetic details i.e. chipped paint, loose doorknobs, leaky faucets. Chances are that the better your home looks, the quicker it will sell.
In most circumstances your buyer will have a building inspector evaluate your home to find out what improvements, if any, are necessary. Whatever repairs are needed may be deducted from the selling price, likely with a margin of error that will benefit your buyer.
Tip: You may wish to have your home inspected first if you suspect there is a serious problem. Some sellers in fact use their inspections as a marketing tool to demonstrate how “great” their homes are and thereby to get top dollar for them.
A positive inspection report from a reputable agency provides an incentive to potential buyers.
Note: If the inspection reveals any serious liabilities, you are legally obligated to disclose that information to potential buyers.
Conclusion: There is no right answer to whether or not you should absorb the cost of the building inspection. You may be wasting your money since the buyers will probably have their own inspection done anyway, but you could see some benefits at the negotiating table. Ask for the opinion of your experienced agent, if you have one, before deciding on whether you should have an inspection done.
4) Discharge of your mortgage
If you do not have a mortgage on your property, then this matter will not influence your decision of whether to sell or not.
Most lenders have a few options available for handling your mortgage when you sell, depending on the specifics of your current mortgage agreement. You may have the following options available to you such as:
a) you may be allowed to take your mortgage with you to your new home;
b) you may be able to let the buyer assume it; or
c) you may be able to pay it off early.
Lenders often charge legal and/or penalty fees when you choose one of these options. Check your mortgage agreement to determine what is permitted and talk to your lender to find out what fees you might incur.
Tip: Fees are SOMETIMES negotiable. If you have been a loyal client of your lender for many years, you may be able to “talk down” a prepayment penalty, however, many lenders have a policy against renegotiating.
5) Property taxes and prepaid utilities
The day you usually pay your property taxes is not likely to coincide with the day you sell your home. In the sale contract, there will be an adjustment date. Usually the adjustment date is the same day as the possession date, or the day you hand the buyer the keys. In effect,, your buyer may owe you a refund on a portion of your annual property tax (or you may owe the buyer some money if you don’t prepay your property taxes). Likewise, any prepaid utilities, condo fees, or assessments need to be reviewed.
Tip: Your lawyer can work out exactly how much is owed to whom and adjust the taxes as part of the conveyance or statement of adjustments.
6) Moving Costs
Naturally, the cost of moving your household items depends on how much stuff you are planning to move with you, and what moving company you hire.
Tip: Shop around and make sure you feel comfortable about the company who will be assisting you, especially if you will be moving fragile or delicate items.
7) GST
GST applies to most services you will use in selling your home, therefore expect that real estate agents, lawyers, appraisers, building inspectors, surveyors, and anyone else you hire to help your home will charge GST on top of their service fees.
Agreement of Purchase and Sale
When excited and happy buyers decide that they like to buy your home, they fill out a contract of purchase and sale that includes the price they are offering, all conditions they want on the contract, and the date when they would like to take possession of your home.
The buyer’s agent may give the contract to your agent, and you will review the offer with your agent (or lawyer, if you’re not using an agent). The buyer’s agent may also choose to present the offer to you an your agent in person and give you some background information about the buyers, including how they arrived at the starting point of their initial offer. At this stage, the contract is called an OFFER, and if you and the buyers can agree on all terms and conditions, you’ll have an accepted offer, subject to the agreed terms on the offer. If the offer is subject to the buyers receiving and approving an inspection report on your home, your home will not be sold until the buyers have had a chance to review and approve the inspection report.
Your agent will take you through the offer step by step and point out the key features, while the buyers’ agent explains how or why the buyers made their offer subject to various terms and conditions. All conditions (or subject to’s) must be removed from the contract before your house is considered sold- that is, sold unconditionally with a firm and binding contract in place.
It is the task of your lawyer to conduct several searches to ensure that there are no encumbrances against the property such as mortgages, liens, rights-of-way or encroachments. In addition, your lawyer will prepare the purchase documentation for signing by the purchaser and the vendor, complete the mortgage documentation, report to you any outstanding problems, meet with you to sign all closing documentation, arrange to close the transaction, register your title to the new home, register any mortgage and finally report to you.
What to do with your current mortgage
What happens to your current mortgage if you decide to sell your home? You have three choices:
1) Pay off your mortgage
2) Let your buyer take over your mortgage along with your home
3) Take your mortgage with you to your new home
1) Pay off your mortgage early
Speak to your bank and find out before hand whether there will be a penalty for paying off your mortgage early.
2) Let your buyer take over your mortgage along with your home
If you are trying to sweeten the deal for a potential buyer, and your mortgage rate is lower than the current rate, consider taking advantage of the “assumability” option. Basically, you allow your buyer to assume your mortgage at its existing rate when he purchases your home. Assumability is often restricted to fixed rate mortgages.
Note: It is rare to assume a seller’s mortgage. Generally, if circumstance make your mortgage look attractive to a buyer, it is probably a mortgage you wish to hang on to, rather than approaching a lender for a new mortgage at the higher current interest rate.
3) Take your mortgage with you to your new home
Most mortgage agreements have a “portability” option that allows you to apply your current mortgage to a new home if you decide to sell. Porting” your mortgage may be your best alternative if there’s too much still owning on your mortgage for you to consider paying it off immediately, and if your existing mortgage rate is lower than the current rate.
Often, only fixed rate mortgages are portable.
Speak to your bank and find out whether this is a viable option for you.
Condos: Additional documents and requirements
The legal working of selling a condominium are slightly different from those for selling a house. For example, condos may have separate standard legal forms.
But there are two very important elements specific to condominium sale contracts: the financial status of the condominium corporation and its bylaws.
In most provinces, these details are included in a document known as the:
- condominium certificate
- estoppel certificate
- information certificate
- status certificate
It lists the expenses for a specified unit, discusses the status of the complex in its entirety, explains the regulations and procedures for the administration of the complex, outlines the rules governing behaviour of residents and the corporation, and stipulates all financial obligations.
As a vendor, you can anticipate your buyer’s request by ensuring your agent has a copy of all relevant papers, and by providing copies to potential buyers at showings. You must make all these documents available to the buyer, and if you can provide everything promptly, it may help to solidify a trusting relationship with potential buyers and speed up the process. The condominium corporation must provide you with a copy, but they often take quite a while to process requests. The moral of the story is, send in your written request for all the required documents well in advance.
RESERVE FUNDS:
Your buyer will also be interested in the state of the condominium corporation’s reserve fund. This is the fund that supplies money for structural repairs and any renovations or work needed on the complex. This information is generally contained in the condominium certificate or the financial statements for the building.
