It's a good idea to educate yourself on the not-so-obvious parts of a real estate contract
Amy Fontinelle
When you formally make an offer on a home you want to buy, you'll fill out a lot of paperwork specifying the terms of your offer. Aside from such obvious things as the address and purchase price of the property on which you're making an offer, there are some items you should be sure to include in your real estate purchase contract.
1. Finance Terms
If you are like most people and you won't be able to buy the home without obtaining a mortgage, your purchase offer should state that your offer is contingent upon obtaining financing at a specified interest rate. If you know you can't afford the monthly payment on the house if the interest rate is higher than 6 per cent, don't put 6.5 per cent in your offer. If you do that and you are only able to obtain financing at 6.5 per cent, the seller will get to keep your earnest money deposit when you have to back out of the offer.
If you need to obtain a certain type of loan in order to complete the deal, you should also specify this in your contract. If you are paying all cash for the property, you should state this as well because it makes your offer more attractive to sellers. Why? If you don't have to get a mortgage, the deal is more likely to go through and closing is more likely to happen on time. (Learn more in 6 Ways To Come Up With A Down Payment On A Home.)
2. Seller Assist
If you want the seller to pay part or all of your closing costs, you must ask for it in your offer. The offer should state the amount of closing costs you are requesting as a dollar amount (e.g., $6,000) or as a percentage of the home's purchase price (e.g., 3 per cent).
3. Who Pays Specific Closing Costs
The agreement should specify whether the buyer or seller will pay for each of the common fees associated with the home purchase, such as escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax and so on. Your real estate agent can advise you as to whether it is the buyer or seller who customarily pays each of these fees in your area.
4. Home Inspection
Unless you are buying a tear-down, you should include a home inspection contingency in your offer. This clause allows you to walk away from the deal if a home inspection reveals significant and/or expensive-to-repair flaws in the structure's condition. For example, if the home inspection reveals that the home needs a new roof at a cost of $15,000, the home inspection contingency would give you the option to walk away from the deal.
5. Fixtures and Appliances
If you want the refrigerator, dishwasher, stove, oven, washing machine or any other fixtures and appliances, do not rely on a verbal agreement with the seller and do not assume anything. Specify in the contract any fixtures and appliances that are to be included in the purchase.
6. Closing Date
How much time do you need to complete the purchase transaction? Common time frames are 30 days, 45 days and 60 days. Issues that can affect this time frame might include the seller's need to find a new home, the remaining term on your lease if you are currently renting, the amount of time you have to relocate if you are moving from a job, and so on. Occasionally, the buyer or seller might want a closing as short as two weeks, but it's difficult to remove all the contingencies and obtain all the necessary paperwork and funding in such a short time period. (Learn more in 10 Hurdles To Closing On A New Home.)
7. Sale of Existing Home
If you are an existing homeowner and you will need the funds from the sale of that home to buy the home you are making an offer on, you should make your purchase offer contingent upon the sale of your current home. You should also provide a reasonable time frame for you to sell your home, such as 30 or 60 days. The seller of the property you're interested in is not going to want to take his property off the market indefinitely while you search for a buyer.
There are many other things that go into a thorough real estate contract, but for the most part, you shouldn't have to worry about them. Real estate agents will commonly use standardized, fill-in-the-blank forms that cover all the bases, including the ones described in this article.
If you want to familiarize yourself with the details of the purchase agreement form you're likely to use before you write your offer, ask your real estate agent for a sample agreement, or search online for the standard form that is common in your locality. (If you are looking for a good deal and have time to wait, a short-sale house may be for you. To learn more, read Purchasing A Short-Sale Property.)
The Bottom Line
Even though these forms are common and standardized and a good real estate agent would not let you leave anything important out of your contract, it is still a good idea to educate yourself about the key components of a real estate purchase agreement.
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Tuesday, August 24, 2010
Wednesday, August 18, 2010
Home sales tumble
Garry Marr, Financial Post
Housing sales were down 30% in July from a year ago, and the Canadian Real Estate Association is blaming the drop on the new harmonized sales tax in Ontario and British Columbia.
The Ottawa-based group, which represents 100 real estate boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from the previous month, a decline “almost entirely the result of fewer sales in British Columbia and Ontario,” where the HST went into effect on July 1.
The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.
Phil Soper, chief executive of Royal LePage Real Estate Services Ltd., said the HST, combined with tougher mortgage rules, expectations of higher interest rates and the bounceback from the recession, drove the market earlier this year. “You take those four things and add them together and you get a highly front-ended year, which we forecast,” he said.
The housing market did get some good news from Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal, which all lowered interest rates Monday. The five-year, fixed-rate closed mortgage is down to 5.49%, which means that on a discounted basis, consumers can likely lock in a rate of less than 4% for five years.
But John Andrew, a professor of real estate at Queen’s University in Kingston, Ont., doubts the cut in bank rates will be enough to reverse a declining housing market.
“With homes sales down 30%, that’s surprising. I was expecting a drop, but nothing that big. I think prices are next [to decline] although they are holding their own now,” Prof. Andrew said.
“Thank goodness rates are as low as they are. If we were seeing significant increases in interest rates, it would disastrous for real estate prices,” Prof. Andrew said.
The average price of a home sold in July was $330,351, just a 1% increase from a year ago. However, the average price of a home sold in June was $342,662, so prices are off 3.6% from a month ago.
CREA said the lack of activity in British Columbia and Ontario — two of the country’s most expensive markets — likely skewed average prices down. In B.C., sales dropped 14.1% from a month ago on a seasonally adjusted annual basis. In Ontario, the decline was 8%.
The two provinces accounted for 85% of the change in national activity.
“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA’s president.
He warned activity will be off for the rest of 2010.
“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals,” Mr. Pahud said.
Prices are getting a boost from a drop in supply. The seasonally adjusted annual number of new residential listings fell 7.2% in July from the previous month, the third consecutive monthly decrease and the steepest drop in more than a decade.
However, the overall inventory rate, which reflects all housing on the market, is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.
Douglas Porter, deputy chief economist of BMO Capital Markets, said most consumers who were sitting on the sidelines already pushed their purchase ahead in the spring, so he’s also expecting a soft market for the next few months.
"Although with long-term mortgage rates dropping, employment improved and prices stabilized, the longer-term outlook is far from dire,” Mr. Porter said.
Housing sales were down 30% in July from a year ago, and the Canadian Real Estate Association is blaming the drop on the new harmonized sales tax in Ontario and British Columbia.
The Ottawa-based group, which represents 100 real estate boards across the country, said July sales plunged 6.8% on a seasonally adjusted basis from the previous month, a decline “almost entirely the result of fewer sales in British Columbia and Ontario,” where the HST went into effect on July 1.
The slowdown had been expected as consumers rushed to buy homes ahead of the July 1 implementation in those provinces. The HST only applies to services used in purchasing and selling an existing home, such as real estate commission, and not the actual sale price.
Phil Soper, chief executive of Royal LePage Real Estate Services Ltd., said the HST, combined with tougher mortgage rules, expectations of higher interest rates and the bounceback from the recession, drove the market earlier this year. “You take those four things and add them together and you get a highly front-ended year, which we forecast,” he said.
The housing market did get some good news from Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal, which all lowered interest rates Monday. The five-year, fixed-rate closed mortgage is down to 5.49%, which means that on a discounted basis, consumers can likely lock in a rate of less than 4% for five years.
But John Andrew, a professor of real estate at Queen’s University in Kingston, Ont., doubts the cut in bank rates will be enough to reverse a declining housing market.
“With homes sales down 30%, that’s surprising. I was expecting a drop, but nothing that big. I think prices are next [to decline] although they are holding their own now,” Prof. Andrew said.
“Thank goodness rates are as low as they are. If we were seeing significant increases in interest rates, it would disastrous for real estate prices,” Prof. Andrew said.
The average price of a home sold in July was $330,351, just a 1% increase from a year ago. However, the average price of a home sold in June was $342,662, so prices are off 3.6% from a month ago.
CREA said the lack of activity in British Columbia and Ontario — two of the country’s most expensive markets — likely skewed average prices down. In B.C., sales dropped 14.1% from a month ago on a seasonally adjusted annual basis. In Ontario, the decline was 8%.
The two provinces accounted for 85% of the change in national activity.
“The soft sales figures we’re seeing right now can be attributed in part to accelerated home purchases earlier in the year,” said Georges Pahud, CREA’s president.
He warned activity will be off for the rest of 2010.
“Activity may remain at lower levels for some time, but ultimately we expect a more stable market to emerge, with demand coming back into line with economic fundamentals,” Mr. Pahud said.
Prices are getting a boost from a drop in supply. The seasonally adjusted annual number of new residential listings fell 7.2% in July from the previous month, the third consecutive monthly decrease and the steepest drop in more than a decade.
However, the overall inventory rate, which reflects all housing on the market, is climbing. The number of months of inventory, which represents the number of months it would take to sell current inventories at the current rate of sales activity, was seven month in July. A year ago the number was 4.4 months.
Douglas Porter, deputy chief economist of BMO Capital Markets, said most consumers who were sitting on the sidelines already pushed their purchase ahead in the spring, so he’s also expecting a soft market for the next few months.
"Although with long-term mortgage rates dropping, employment improved and prices stabilized, the longer-term outlook is far from dire,” Mr. Porter said.
Monday, August 16, 2010
Canadian housing market cools
Steve Ladurantaye Real Estate Reporter
The malaise in Canada's housing market is deepening, as record-low interest rates and a vast selection of homes prove to be insufficient incentives to draw new buyers into the market.
Just days after the Canadian Real Estate Association downgraded its sales forecast for the rest of the year, data from British Columbia and Alberta show sharp double-digit decreases in the number of homes sold in July compared to a year ago.
The resale housing market has been at the forefront of Canada's economic recovery, with prices rebounding sharply from recessionary lows. But the market seems to have peaked, and signs of stress are showing across the country.
In Vancouver and Calgary, sales were down 45 and 42 per cent, respectively, compared to last July. In Toronto, new condo sales showed a quarter-over-quarter contraction for the first time in 16 years.
While the CREA typically aggregates information from each of the country's 101 real estate boards in the middle of each month, the boards can release sales data on their own sooner.
Vancouver and Calgary reported Wednesday, Toronto is expected to report Thursday.
All of this slippage is happening while mortgage rates remain at record lows, despite constant warnings from economists that they are bound to rise as the Bank of Canada moves its lending rate higher.
Competition among the banks for new business along with falling bond yields have meant mortgage rates have been largely unaffected by any Bank of Canada moves.
The malaise in Canada's housing market is deepening, as record-low interest rates and a vast selection of homes prove to be insufficient incentives to draw new buyers into the market.
Just days after the Canadian Real Estate Association downgraded its sales forecast for the rest of the year, data from British Columbia and Alberta show sharp double-digit decreases in the number of homes sold in July compared to a year ago.
The resale housing market has been at the forefront of Canada's economic recovery, with prices rebounding sharply from recessionary lows. But the market seems to have peaked, and signs of stress are showing across the country.
In Vancouver and Calgary, sales were down 45 and 42 per cent, respectively, compared to last July. In Toronto, new condo sales showed a quarter-over-quarter contraction for the first time in 16 years.
While the CREA typically aggregates information from each of the country's 101 real estate boards in the middle of each month, the boards can release sales data on their own sooner.
Vancouver and Calgary reported Wednesday, Toronto is expected to report Thursday.
All of this slippage is happening while mortgage rates remain at record lows, despite constant warnings from economists that they are bound to rise as the Bank of Canada moves its lending rate higher.
Competition among the banks for new business along with falling bond yields have meant mortgage rates have been largely unaffected by any Bank of Canada moves.
Wednesday, August 4, 2010
Condo sales in Toronto drop for first time in 16 years
Steve Ladurantaye - Globe and Mail Update Published on Tuesday, Aug. 03, 2010
New condo sales in Toronto decreased for the first time in 16 years in the second quarter, as the market cooled along with the broader housing market.
Sales of new condos have posted quarter-over-quarter sales gains since 1994, said Urbanation Inc, an information gathering company that tracks sales in the Toronto area. There were 4,991 sales in the second quarter, an eight per cent decline from the first quarter’s 5,415.
“Despite the quarter-over-quarter decrease, sales during the past four quarters were near record highs,” said Ben Myers, Urbanation’s executive vice-president. “When we consider the rapid sales pace of the six months prior to Q2/10, the new sales market is softening. Expect a slightly slower sales pace for the remaining two quarters of 2010.”
The amount of time units are sitting on the market has also increased, to 25 days in the second quarter from 22 days in the first quarter. There were 12,638 unsold units available at the end of the second quarter, an increase of 12 per cent over the same time last year.
The resale market held up far better, setting a new quarterly record of 5,076 sales, beating the previous high of 4,854 set in the third quarter of 2009. It’s an 18 per cent increase over the first quarter, and five per cent over a year ago.
Prices held steady, however, with the average selling price rising less than one per cent in the second quarter to $331,000 as buyers had a record 10,997 units to choose from.
“A flush resale supply coming kept resale pricing in check,” Mr. Meyers said. “Many of these resale listings were absorbed during the quarter, bringing the number of resale listings down to 8,714 units, which allowed the strong demand during the spring months to be met without further impacting affordability due to rising resale prices.”
He said prices should remain stagnant in the coming months because of a flood of new supply.
"With almost 6,000 occupied and not yet registered units in the CMA at the end of Q2/10, and the potential for as many as 12,000 completions over the remaining quarters of 2010, it’s possible the addition of that many units to the market will force resale prices to remain relatively flat,” he said.
New condo sales in Toronto decreased for the first time in 16 years in the second quarter, as the market cooled along with the broader housing market.
Sales of new condos have posted quarter-over-quarter sales gains since 1994, said Urbanation Inc, an information gathering company that tracks sales in the Toronto area. There were 4,991 sales in the second quarter, an eight per cent decline from the first quarter’s 5,415.
“Despite the quarter-over-quarter decrease, sales during the past four quarters were near record highs,” said Ben Myers, Urbanation’s executive vice-president. “When we consider the rapid sales pace of the six months prior to Q2/10, the new sales market is softening. Expect a slightly slower sales pace for the remaining two quarters of 2010.”
The amount of time units are sitting on the market has also increased, to 25 days in the second quarter from 22 days in the first quarter. There were 12,638 unsold units available at the end of the second quarter, an increase of 12 per cent over the same time last year.
The resale market held up far better, setting a new quarterly record of 5,076 sales, beating the previous high of 4,854 set in the third quarter of 2009. It’s an 18 per cent increase over the first quarter, and five per cent over a year ago.
Prices held steady, however, with the average selling price rising less than one per cent in the second quarter to $331,000 as buyers had a record 10,997 units to choose from.
“A flush resale supply coming kept resale pricing in check,” Mr. Meyers said. “Many of these resale listings were absorbed during the quarter, bringing the number of resale listings down to 8,714 units, which allowed the strong demand during the spring months to be met without further impacting affordability due to rising resale prices.”
He said prices should remain stagnant in the coming months because of a flood of new supply.
"With almost 6,000 occupied and not yet registered units in the CMA at the end of Q2/10, and the potential for as many as 12,000 completions over the remaining quarters of 2010, it’s possible the addition of that many units to the market will force resale prices to remain relatively flat,” he said.
Tuesday, August 3, 2010
CREA lowers home sale expectations
By QMI Agency
There will be fewer homes sold this year, but for more money than initially thought, the Canadian Real Estate Association said Friday.
CREA downward revised its 2010 housing market forecast after a weak spring buying season in four of Canada’s most crucial markets.
National sales activity via the Multiple Listing Service is now expected to reach just 459,600 units this year, representing an annual decline of 1.2%.
That’s because the pent-up demand resulting from the recession is now running out and further interest rate hikes will keep homebuyers in a cautious mood, CREA said.
As new listings shrink to adjust to fewer buyers, home prices are now forecast to jump 3.5% in 2010 to reach a national average of $331,600.
"Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result," said Gregory Klump, CREA Chief Economist.
Prices are expected to ease off by 0.9% again in 2011, though some provinces could see modestly higher price tags.
"The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability," Klump said.
Big swings in the market could finally be behind us, he said.
"Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year."
CREA expects that in 2011, slower economic growth and consumer spending will contribute to a 7.3% decline in home sale activity.
"While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local realtor to best understand the outlook in their market,” said CREA President Georges Pahud.
There will be fewer homes sold this year, but for more money than initially thought, the Canadian Real Estate Association said Friday.
CREA downward revised its 2010 housing market forecast after a weak spring buying season in four of Canada’s most crucial markets.
National sales activity via the Multiple Listing Service is now expected to reach just 459,600 units this year, representing an annual decline of 1.2%.
That’s because the pent-up demand resulting from the recession is now running out and further interest rate hikes will keep homebuyers in a cautious mood, CREA said.
As new listings shrink to adjust to fewer buyers, home prices are now forecast to jump 3.5% in 2010 to reach a national average of $331,600.
"Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result," said Gregory Klump, CREA Chief Economist.
Prices are expected to ease off by 0.9% again in 2011, though some provinces could see modestly higher price tags.
"The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability," Klump said.
Big swings in the market could finally be behind us, he said.
"Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year."
CREA expects that in 2011, slower economic growth and consumer spending will contribute to a 7.3% decline in home sale activity.
"While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local realtor to best understand the outlook in their market,” said CREA President Georges Pahud.
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