Buyer's Handbook

Buyer's Handbook 

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Selecting Your Real Estate Agent

A REALTOR® is a licensed real estate agent who is a member of the Canadian Real Estate Association (CREA). A licensed real estate agent in Canada, does not have to be a member of CREA to practice real estate.

A BROKER has taken the necessary educational courses, and earned a broker's license. Many brokers own their own real estate office and are "brokers of record," with other real estate agents "depositing their license" under the "broker of record". 

Why use a REALTOR®? Click Here to Find the Answer to this Question. 

Many of the same questions, hesitations and strategies connected with seeking out professional assistance in any field — whether you're looking for a doctor, dentist, lawyer or accountant — come into play when you're selecting a real estate agent. Some people find an agent through a family member or friend. This is often a very reliable approach, since word of mouth advertising is a powerful force, and many times an indicator of the quality of the job performed. But you might not always find the most compatible assistance this way. And in a transaction as important and intensive as buying and selling a home, that can be critical.

A referral from a family member or friend doesn't necessarily guarantee a perfect match. Just think of something as simple as a movie or restaurant recommendation. Your close friends rave about a new Chinese food place downtown — so you check it out. Could this possibly be the same restaurant they were describing? Mediocre service. No chopsticks. Bland flavours. It's the same restaurant. Same cook. Same waiters. Just different perceptions.

Regardless of how you get an agent's name, it might be worth interviewing at least a couple before you make a final decision — or at least arming yourself with some criteria to go over with any agent who has been recommended to you. 

A Few Things to Look For

Check on experience, reputation, education and productivity. As with most professions, experience pays dividends in real estate. Experienced agents know the market and the marketing process. They'll have the best chance of quickly and smoothly helping you to buy or sell your home. This is not necessarily the one who has "Sold the Most" or is "Number One", etc., but someone who, after you have interviewed him or her, has demonstrated to you that they have a thorough understanding of the market place and the fundamentals which drive it, along with an organized approach to listing a property for sale or finding one to buy.

The number of transactions an agent is handling monthly or yearly is going to give you an indication of how committed the agent is to the profession. Is the agent a part-timer who's just dabbling in real estate sales — or is the agent a full-time professional whose livelihood depends entirely on an ability to successfully and repeatedly close real estate transactions?

If you're a buyer — does the agent offer buyer representation? More and more buyers are deciding they want full contractual representation on the same level as the seller. Be sure to discuss buyer representation with any agent you're thinking about working with.

Is the agent part of a national network? This can be especially important if you're selling in one city in preparation of moving to another. Your selling agent can refer you to a professional, compatible agent in your destination city — and keep in close contact with that agent so both your selling and buying efforts are closely coordinated.

In today's Real Estate Industry, the use of current technology plays a major role in the marketing and administration of a property listed for sale, and in the search for a property to buy. Those REALTORS® who have embraced these new methods and approaches, and use them as tools to enhance client service , are tomorrow's success stories. Be sure however, to filter out the "sizzle" from the "steak": the objective in the final analysis is still to buy or sell a property.

Ask for references: successful and forthright agents will be happy to provide them.

And a final point: Does the agent seem primarily interested in sharing expertise and market knowledge in an honest and straightforward manner? Or does the agent seem more interested in telling you what you want to hear — or spend a lot of effort trying to market additional products and services? The worst time to secure the services of a "yes-man" or an agent who seems to have a bit too many irons in the fire is when you're entering a transaction involving something as expensive as your home. You need straightforward, reliable information — even if it's not necessarily flattering regarding the home you're selling — or very encouraging regarding a home you think you might want to buy. 

The Top Five Mistakes Made by Buyers

  1. Not knowing how much they can afford before they make an offer. The easiest way to avoid this mistake is to get pre-approved for a mortgage by a lender so you know in advance exactly how much you can afford.  Most pre-approvals are free and it will give you a basis to make a more informed purchasing decision when you find the house you like.
  2. Not making a wish-list of what they need in a home before they look. Sometimes people will go to look at homes and fall in love with a house that doesn’t meet their long term needs.  It’s best to make a list of all the things you want (and need) in a home before you go out and look.  That way you have a list of requirements you can use to rate each home you see objectively.  
  3. Not realizing that the wrong mortgage can cost thousands of dollars in needless interest and taxes. Check with your accountant before you make your final decision on which mortgage you are going to choose.  Your accountant will be able to tell you what the long term effects will be on your income, your taxes and the equity you build in your home over time. Most people aren’t aware that with a standard 30 year mortgage they will be paying two and a half times the amount of the mortgage in payments.  With some planning in advance and a simple strategy they can cut the amount of interest they pay dramatically and own their homes sooner.
  4. Not discovering hidden defects before they buy a home. One of the most expensive mistakes is also one of the easiest to avoid, by having a professional pre-purchase home inspection.  Don’t get stuck with a money pit.  The cost of a professional home inspection is usually a few hundred dollars, but the peace of mind it can give you and the expense you can avoid needlessly is in the thousands of dollars.
  5. Not knowing how much their credit can affect their ability to buy or refinance a home. Before you buy a home, many of the clouds on your credit history can be cleared up or even eliminated.  Your mortgage professional can help you review and prepare your credit file in advance.

Home Buyer's Tips - The Quick Lesson 

To begin with, make a list of your “Needs and Wants” in descending priority order.  The more definitive and realistic the priority list is, the better chance your Agent has of finding your dream home.  Have reasonable expectations about compromising on some of the features you would like – the absolutely perfect dream home may not exist.  This list will help your Realtor greatly narrow the search which will result in saved time and disappointments for you.

At the earliest stages of house hunting get in touch with a mortgage lender.  Meeting with a lending professional and getting  pre-qualified will determine a price range that is both suitable and possible for you.  Until this is known, house hunting can result in devastating disappointment by shopping in an unrealistic price range.  Better yet is getting pre-approved and having your loan ready to go when the home is found that you would like to purchase.  The seller will feel a lot more comfortable with an offer from a pre-qualified or pre-approved buyer than they would with a buyer who hasn’t been to the bank yet – unless you can pay cash!

Select a full-time Agent with whom you are compatible, develop open and good communication with that person and stick close to them.  Working with several agents at the same time is unfair to all parties concerned and can actually work against your best interests as a potential homeowner.  As Agents, we all use the same basic sources of information, including the local Multiple Listing Service®.  The idea that working with several Agents at the same time will help uncover your dream home is not true.  You will more than likely waste time covering the same ground and your multiple “Agents” will waste time researching property that you have already seen.

Listen carefully to the suggestions of your Agent when becoming serious about a particular home.  Read and discuss thoroughly with your Agent the disclosure statements on the home and obtain inspections from qualified professionals.  Your Agent should be able to supply you with the names of several professionals that you can contact.

Be sure you understand your rights and obligations set out in the Agreements and Contracts.  It is very important to completely understand the terms and conditions of the legally binding Offer to Purchase and the Agency Contract, to name just two.  Wrong assumptions, poorly written or missing clauses, and not understanding how the clauses affect the purchase, can lead to increased costs or a void contract.  An experienced REALTOR® can thoroughly explain the agreement to you and help you to fulfill your contractual obligations.

Remember – there’s no such thing as a dumb question!

Be sure you understand “Agency”.  Provincial and Common Law requires that all Agents disclose to their clients and customers exactly whom they represent:  the Buyer, the Seller or both.  Please have a serious conversation with your Agent regarding “Agency”.  Discuss the pros and cons of “Buyer Representation”, etc.

Don’t let emotion be the blinders of reason.  Buying a home is an exciting and stressful time and is usually an emotional decision.  It is important that those emotions be validated by facts and reason.  An experienced Agent will help to remove the emotion from the negotiating process and provide you with the information you need to make an informed decision.

The experience of buying a home can be thoroughly enjoyable if the buyer and the agent work together as a co-operative team.  If you are considering purchasing a home at this time or in the near future, we would appreciate the opportunity of meeting with you to see how we match up!

Home Inspectors - Use the Good Ones

Please NOTE:   Home Inspectors Do Not Have a National Standard.

The home inspection industry in Canada and the various provincial associations, have been working towards the development of a national code of occupational standards and hopes to have a certification program for inspectors developed and implemented within the next few years. Some provincial associations such as the Ontario Association of Home Inspectors (OAHI) offer certification designations and extensive training programs, but so far there is no standard across the country.  There are also a number of private inspection associations and organizations across the country, each with different inspection standards and levels of qualification. 

The Canadian Association of Home and Property Inspectors (CAHPI) is the driving force behind this national initiative along with support from Canada Mortgage and Housing Corporation and Human Resources Development Canada.  CAHPI hopes a national certification program will elevate the level of professionalism in the home inspection industry, especially in the eyes of consumers and lead to regulation of the industry. Along with minimum standards to become a certified home inspector, the association is also developing a code of ethics and standards of performance for training home inspectors.

While this National standard for the Home Inspection industry is not yet in place, the following questions can help Buyers (or Sellers) to select a "qualified" inspector and ensure that the job is performed professionally, accurately, and completely. Points to consider:

  • How long have they been working as home inspectors?
  • What qualifications, training and education do they have?
  • Do they belong to an industry association?
  • Can they provide references?
  • What does the inspection include?
  • Is the inspection strictly visual?
  • Can the client accompany the inspector during the inspection?
  • Are there re-inspections if necessary, to inspect repairs?
  • Do they also do renovation work?
  • Are they working on behalf of a real estate professional?
  • Will a written report be provided and when?
  • Will they identify current problems as well as those that are imminent?
  • Do they have errors and omissions insurance?
  • Do they have any disclaimers or limitations as part of their contract?


 The Buyer's Guide - A Detailed Look at a Complicated Matter

An Introduction to Buying a Home

Whether you are buying your first home, or a replacement, the entire process should be a time of continuing excitement and anticipation. Keeping in mind that old expression, "An Informed Buyer is a Happy Buyer", the purpose of this guide, and the time we spend together discussing your   housing requirements (and showing you properties), is intended to assist you in making an informed decision; one which will allow you to look back, after you have closed the transaction, and feel comfortable that you have purchased wisely and that your new home meets most, if not all, of your needs.

It is difficult (and sometimes impossible) to find a home which is the "perfect fit" for everything that you want or can afford, regardless of how long you take in the process and how many homes you look at. The number of variables which can come into play in the property search are extensive when one considers such things as location, size, color choices, style, layout, property characteristics, heating and air treatment systems, age, construction, maintenance factors, and of course, price, just to name a few.

Having said all of this, home selection is usually an exhilarating experience, and once the deal has been accepted and the moving truck arrives at the front door, you just know that you made the right choice.

An Introduction to Mortgages

For the average buyer or seller, there is probably no single area of a real estate transaction which is so poorly understood as the mortgage arrangement. The seller or buyer tends to regard the word "mortgage" simply as a loan or debt. This basic misunderstanding leads to an incorrect perception of the obligations involved in a mortgage transaction.

In general terms, a mortgage can be defined as "A Transfer of Some Interest in Real Property as Security for a Debt." By it's very nature, a mortgage is not a loan. It is instead the security for the loan. The two parties to a mortgage transaction are referred to as the Mortgagor and the Mortgagee.

The Mortgagor is the person who "gives" the mortgage (usually the buyer). In return, the mortgagor usually receives the funds, makes the required payments and maintains possession of the property. This individual also reserves the right to reclaim the interest in the property from the Mortgagee once that debt has been paid off. The Mortgagee (the Lender or Bank) "receives" or "takes back" the mortgage and has an interest in the property until the debt is fully repaid and the mortgage security is discharged from the public records.

Obtaining a mortgage from a lender is generally a standard procedure, regardless of whether the lender is a bank, trust company, insurance company, private individual, etc. The lender will always want to ensure that his security (the Mortgagor's covenant or promise to pay and the property being mortgaged) satisfies his lending criteria, and therefore he will perform a credit check on the Mortgagor as well as performing an appraisal of the home to ensure that it is worth the amount that the buyer has agreed to pay to the seller.

Through programs initiated by the Federal Government, homes can now be purchased with a mortgage of up to 95% of the purchase price of the property. The conditions under which the amount of the down payment, the maximum purchase price allowed, and the carrying costs of the home (principal, interest, heating, taxes) are governed by a set of guidelines established by Canada Mortgage and Housing Corporation of Canada (C.M.H.C.). Generally speaking, all lending institutions follow these guidelines and therefore, their use, relative to the loan applications in support of the mortgage, have become universal. 

Buyer's Financial Ratios - GDS and TDS

Lending institutions utilize various criteria in assessing a borrower's willingness, ability and capacity to repay loans. As it applies to mortgages, there are two ratios which are universally accepted within the industry and form the basis of most lending decisions including those accepted by Canada Mortgage and Housing Corporation (C.M.H.C.) for loan insurance purposes.

The first of these is known as the Gross Debt Service Ratio (G.D.S.) which measures the relationship of the borrower's total costs for mortgage principal and interest payments, municipal taxes, and heating costs to the total gross family income before any deductions. Depending upon the lender's policies, the maximum that this ratio may reflect is a range of 30% to 32%. In other words, a maximum of approximately one third of a family's gross income is allowed to be spent on meeting the cost of buying and heating their home. The second of these ratios is known as the Total Debt Service Ratio (T.D.S.) which measures the relationship of the borrower's total costs for all debts including mortgage principal and interest payments, municipal taxes, heating and hydro, loans, car payments, charge card payments, etc. to the total gross family income before any deductions. In most cases, lenders will allow a maximum ratio of 42% for this calculation.

When a borrower is completing an application for a loan, it is imperative that complete and accurate information is provided to the lender since any discrepancies and/or omissions are likely to be disclosed as part of the credit bureau report customarily obtained by the lender. Such discrepancies will only result in a delay in the processing of the application as well as creating an environment of mistrust between the lender and the borrower.

High Ratio Mortgages and CMHC

In addition to other functions, C.M.H.C. provides mortgage loan insurance to a lender of mortgage funds in order to assist homebuyers who are purchasing properties where the value of the mortgaging is greater than 65% of the purchase price. As in all insurance programs, there is a premium charged by C.M.H.C. for this payment protection being given to the lender, and the cost is normally charged to the buyer of the property as a one-time fee at the time the loan is extended (the date of closing).

The buyer has the option of paying this premium up front or adding it to the value of the mortgage loan created. In addition, an application fee may also be charged which the buyer must pay at the time of application for the mortgage. This fee is set at $75 or more, depending upon who is providing the appraisal for the property. The insurance premium varies according to the relationship of the loan size to the cost of the property purchased.

For further detailed information about the premium rates referred to above and other loan and insurance provisions, visit the C.M.H.C site.

In addition to the costs as outline above, Ontario Provincial Sales Tax will apply to these amounts since they fall under the definition of insurance premiums, which are taxable at the prevailing rate.

RRSP Withdrawals

The Federal Government administers a Home Buyer's Plan designed to allow the use of your R.R.S.P. funds for a down payment. The following is intended to be an overview of this program. Advice should be sought from your accountant, lawyer, or financial advisor if you have any doubts as to the advisability of utilizing these funds as a means of achieving home ownership. First Time Buyers under this program are defined as those who have not owned a home within the past five years. In the case of a married couple, this can apply to one or both of the individuals.

1. The program applies to the purchase of a re-sale home or the building   of a new home. 

2. The home must be in Canada (not previously owned by you or your spouse) and be used as your principle place of residence. 

3. You must be committed to purchasing a specific home before you can apply for a withdrawal. In other words, you must have negotiated an Agreement of Purchase and Sale on a home of your choice.

4. The home must be acquired (the deal closed) not more than 30 days after receiving the withdrawal under the R.R.S.P. Home Buyer’s Plan.

5. Each eligible person may withdraw up to $20,000 as a down payment. Only the "annuitant" may withdraw from the R.R.S.P.

6. To apply for a withdrawal, you have to complete a Home Buyer's Plan Withdrawal Application which you can be obtained at your district Revenue Canada Office, and give the completed form to the institution that issued your R.R.S.P.

7. You will not pay income taxes on these funds as long as you repay the R.R.S.P. in the future. Such payments must be made annually over a maximum fifteen (15) year period, where the first repayment is due by December 31st of the second year following your withdrawal. Repayments that are not made on time are taxable at the prevailing rates.

8. The money that you repay back into your R.R.S.P. under the plan is not tax deductible since you will have already received a tax credit when you opened the R.R.S.P. originally.

9. You can still continue to contribute to your annual allowable R.R.S.P. levels in addition to the repayment schedule under this program.

Tarion - Ontario New Home Warranty Program

If you are considering the purchase of a new home, you may be required to pay a warranty fee (another form of insurance) to Tarion, the Ontario New Home Warranty Plan provider. Under the respective Act, all new homes must be registered under the plan, and some builders will include the fee in the price of the home, while others will treat the fee as an additional cost to the buyer at the time of closing. The current costs of this program for both residential freehold and condominium units are as shown on the Tarion Web Site. Note that these costs attract the present Ontario Harmonized Sales Tax at the prevailing rate.

Harmonized Sales Tax (HST) and the Replaced GST

As Revenue Canada has stated, in Ontario, "everything attracts the Harmonized Sales Tax...unless it is exempt!" With regard to residential housing, and to keep a complicated matter simple, "New Homes are Taxable and Re-Sale Homes are Not Taxable". The HST will be applied on the purchase of new homes. However, homebuyers will be able to claim a rebate of some of the provincial portion of the tax for new homes priced up to $500,000. The rebate for new primary residences under $400,000 will be six percent of the purchase price (or 75 percent of the provincial portion of the tax), with the rebate amount reduced for homes priced between $400,000 and $500,000. Buyers of new residential rental properties will receive a similar rebate.

Buyers should also be aware that some builders will advertise new homes for sale at "H.S.T. Included" prices. This does not mean that the tax has not been applied; it simply indicates that the H.S.T. is part of the price being offered and that the actual selling price of the home is lower than that being advertised and that the builder will be paying the tax, upon closing, out of the funds he receives from you as the buyer. An information guide is available from Revenue Canada which explains this topic in greater detail should it be necessary.

Ontario Land Transfer Tax 

Title Insurance

Title insurance is a relatively new form of protection for homebuyers in Canada, as opposed to the United States where it has been used extensively for decades. The insurance is put in place at the time of purchase to cover the buyer, his/her heirs and executors, and the lender against any defects in title which may occur as a result of errors or omissions on behalf of their lawyer, the inadequacies of a survey, and many other specific land title issues. With this insurance in place, it is possible that disbursements on closing may be reduced, but at a minimum, peace of mind of the legitimacy of title is assured. In today's environment, most lenders will demand that Title Insurance be arranged for the property at the time of purchase, regardless of the presence of an up to date survey and/or the lawyer's opinion of title. The cost of this insurance is in the range of $275.00.

The Need for a Lawyer

We are sometimes asked if is necessary to use a lawyer to close and otherwise deal with a real estate transaction. Without any hesitation whatsoever, we recommend that every buyer engage the services of a lawyer to look after the many and varied routines associated with the purchase and/or sale of real estate. The cost of this is far less than the penalties, which can accrue, should a deal not close on time or should issues of title, conveyance, liens, and adherence to the law be overlooked. The need for and use of a lawyer, in our opinion, is paramount and directly related to the peace of mind and security which a buyer achieves when the job is done correctly and on time.

Furthermore, if at any time during the process of negotiating the Agreement of buyer and Sale, the buyer is uncomfortable with clauses contained within the offer, the advice of the lawyer may be obtained. This only makes good sense since the purchase of a home is usually the largest single investment that an individual or couple will make in the normal course of their lives. 

Closing Costs

These are costs, which a buyer may incur at the time of closing, which are over and above the basic cost of the property that he/she has purchased. They are normally handled through the buyer's lawyer and typically communicated to the buyer days (and sometimes weeks) prior to the actual date. The following is a list of those items, which a buyer should review for possible applicability to their particular situation. While it is not intended to indicate that these costs are incurred on every transaction, the list will at least act as a means of "ball parking" the magnitude of funds which must be available for disbursement.

  • Lawyer's Fees and Disbursements
  • City Tax Certificate and Searches
  • Zoning Report
  • Engineering Reports
  • Sheriff's Certificate
  • Registry Office Searches
  • Utility Searches
  • Registration of Deed
  • Registration of Mortgage
  • Photocopies, Fax Costs, Postage & Courier
  • Survey Costs
  • Title Insurance Costs
  • Land Transfer Tax
  • Fire and Liability Insurance
  • Ontario New Home Warranty Program Fees
  • Hydro or Gas Deposits
  • Oil Tank Refill (oil heated homes only)
  • Appraisal Fee
  • C. M. H. C. Fees
  • Mortgage Broker's Fees
  • Harmonized Sales Tax (H.S.T.)
  • Interest Adjustment Costs
  • Municipal Taxes
  • Bridge Financing Interest Costs

Buyer Representation

In most residential real estate transactions, the listing agent's commission is paid by the seller of the property. The listing agent is employed, under contract, by the seller to sell the property for him/her and by law, is working for the seller.

The listing agent also has an obligation to the buyer, to treat him/her fairly and to disclose information which is germane to the quality or condition of the property and any other facts which might have a bearing on the buyer's intended use of the property (e.g. zoning, rights of way, restrictions on use of the lands, etc.).

It is now common practice for the Selling agent to work as an agent of the buyer providing the buyer with the comfort of knowing that this agent has his/her, and only his/her, vested interests and fiduciary responsibilities in mind. To this end, the legal relationship which establishes this is by way of a Buyer Representation Agreement, which is signed at the time the agent commences work on locating a home for the buyer. Ontario Provincial Law requires that this contract be completed and signed by the Buyer and the Agent prior to the origination of any Offer to Purchase by the Buyer. 

The Purchase and Sale Agreement

When you have found the home you want and you are ready to purchase, the next step is the drafting of an Offer. This is typically performed by the agent with whom you are working and subsequently the negotiating process begins. The Offer is a standard Ontario Real Estate Association Form and therefore, the "fine print" is universally accepted as the "norm" in most residential real estate transactions. Customizing of the Offer is achieved when the specifics of the property being purchased are added to the standard form along with any clauses, which are unique to the buyer, the seller, or the property. 

At the time of creating an offer, we will review with you the issues related to the purchase, and explain any custom clauses, which may apply, and their impact on your rights, and your obligations. Remember our advice at the beginning of this guide... "An Informed Buyer is a Happy Buyer"!

And now, let's find the home you want... together!


Candi Grant

Candi Grant

Sales Representative
CENTURY 21 B.J. Roth Realty Ltd., Brokerage*
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Copyright, Candi Grant, 2016