Buying a New Home

Introduction
For most of us, buying a house is the most expensive and important decision we will ever make; however, it is not something we are accustomed to doing every day.

The following are some handy tips to keep in mind when purchasing a home.

The Offer
The Purchase Price
When deciding on how much you can offer, do not forget to allow for "extras". These include Land Transfer Tax, insurance, adjustments to the purchase price for realty taxes, fuel oil, water rates, legal fees, and other miscellaneous items. These often amount to several thousand dollars.

The Form
The form on which you make your offer will usually be a standard one provided by your local Real Estate Board. There may be several different "standard" forms. Read the form carefully as you will be bound by it. If there is anything you disagree with or that does not apply, cross it out. If there are any items in the house you want included in the price, such as appliances, curtains, mirrors or chandeliers, write them in. Any additions or deletions are best carried out with the advice of a lawyer.

The Deposit
When buying a house you will be required to make a deposit. Keep the deposit as minimal as possible as circumstances may arise in which you will be unable to complete the purchase. In such a case, you will usually forfeit your deposit to the vendor. The normal deposit is approximately five to six percent of the purchase price. You should ask for interest on this amount. Once you have paid the deposit, if you fail to complete the transaction without lawful excuse or reason, the vendor is entitled to resell the house. If this happens and the house is sold for less than you had agreed to pay, you may get sued for the difference between what you had agreed to pay and what the vendor received on the resale. You could lose more than just your deposit.

The Terms/Clauses of the Offer:
Unless you have cash in the bank, you would be wise to make your offer "subject to financing". This condition must be written on the face of the form. Care must be taken to ensure it is inserted in the correct place. The clause making the offer subject to financing should stipulate the interest rate, principal amount and monthly payments of the mortgage that you require. If you have not discussed these clauses ahead of time with your lawyer, you should add a clause making the offer subject to your lawyer's approval.

In some cases you may ask the vendor to carry some of the financing by taking a mortgage back. This is referred to as a "vendor take back mortgage". Such a term will also form part of your offer. You will have to give the vendor a time limit (usually only a day or so) within which they have to accept your offer. Be prepared that your offer may be returned by the vendor with some of the terms you added having been crossed out and others having been inserted.
The vendor may have, for example, increased the total purchase price. This then becomes their counter-offer. If you accept the counter-offer within the time limit specified by the vendor, you have a new deal. If you do not accept the counter-offer, there is no deal but this does not prevent you from making another offer. You will both have to initial the changes.

Goods and Services Tax (GST)
Whenever you buy a home, and in particular a new home, make sure the offer deals with GST. If the GST is not applicable, the offer should contain the vendor's written representation that this is so. If it is applicable, the offer should stipulate who will be paying it.

The Mortgage
If you are taking out a new mortgage, begin work on this immediately after the offer is submitted to ensure your mortgage is in place should your offer be accepted.
Shop around to get the best terms and be ready to provide the lender with any documentation and information that is required. Usually, an institutional lender will require an appraisal of the home to ensure the purchase price is close to the fair market value of the property. They should advise you prior to you committing to take the mortgage, whether an appraisal is necessary and what the cost of it will be.
Once arrangements have been made to obtain a mortgage, make sure you get a written commitment letter from the lender in advance of your closing date.

Survey
Prior to making your offer, ask to see a copy of the survey of the property. Most lenders will require an up-to-date survey before providing you with a mortgage loan. If the survey is up-to-date, it will indicate the dimensions of the property, location of buildings, fences and other objects on the lot as well as whether the property is subject to any easements or rights of way in favour of neighbours or others such as Bell Canada.

Make the survey part of your offer by attaching it to the offer, initialed by yourself and the vendor and having the offer make reference to the survey of the property. If you have the survey in advance of applying for the mortgage you may be able to get the lender's approval of the form of survey you present, which saves you having to obtain a new survey at your expense. If you have to get a new survey, the cost can run from several hundred dollars to several thousand dollars depending on the nature and extent of the work.

The Lawyer's Role
Have your lawyer review the offer before you sign it.
If this is not possible, at the very least contact him/her and discuss the offer over the phone. You should forward a copy to your lawyer as soon as it is signed.
There are many steps the lawyer must take before moving day and there are time limits in the offer restricting the amount of time your lawyer has to perform them.
Have your lawyer check over the agreement before you remove any of the conditions. This normally involves amending the agreement by deleting the conditions or drawing up a new document which both you and the vendor sign stating that any conditions are now removed. Once all the conditions are withdrawn, you have a binding agreement to purchase.

Buying a New Home
If you are buying a new home, you will usually be asked to sign the builder's form of the "Agreement of Purchase and Sale".
Have your lawyer review this prior to signing it as no two builders' forms are alike and differ substantially from the Real Estate Board forms. Also, builders' Agreements of Purchase and Sale are lengthy and often strongly weighted in favour of the builder.
Ontario New Home Warranty Plan (ONHWP):
New homes purchased from a builder or developer are covered by the ONHWP.
All homes enrolled in the ONHWP after December 31, 1990 are covered against:
All defects in materials and construction for a period of one year after the date upon which the home is completed for possession;
Certain items such as basement leakage and Ontario Building Code violations with respect to safety and health for a two year period; and
Major structural defects for seven years following completion for possession.
Prior to moving day, your lawyer will make sure that your house is covered under the ONHWP and you, in the presence of a representative of the builder, will make an inspection of the house.
It is important that the inspection be done carefully and that all apparent defects or omissions be listed on the Certificate of Completion.
Quite often, the builder's Agreement of Purchase and Sale provides that the cost of enrolling the house under the New Home Warranty Plan will be added to the purchase price. This fee will vary depending on the purchase price of your home.

Pavey, Law, Wannop & Witteveen LLP can help you
Purchasing a home is the most important decision you will ever make. For many of us, a home is where we retreat to escape the turmoil of the world around us. Our qualified team of experienced lawyers is committed to ensuring this is a decision you and your family will be satisfied with for years to come. Call our office today at (519) 621-7260 or e-mail us at . We want to help you.

Revision Date: November 1, 1999

Your choice of legal counsel is a critical and personal decision. The firm you select should be committed to your business and personal needs.

Since 1922, Pavey, Law, Wannop & Witteveen LLP has been providing its clients - large and small - with quality legal advice and services. Our purpose as a firm is twofold - to assist our business clients in the successful performance of their business, and to provide our individual clients with peace of mind through sound, understandable advice and advocacy.

We are a results-oriented firm. Our business clients receive our superior legal counsel that is practical, and guided as much by the potential impact on their businesses as by the law.

Equally, our individual clients are treated with respect and receive clear legal advice geared to resolve issues and find solutions.

For all of our clients, Pavey, Law, Wannop & Witteveen LLP is committed to delivering superior representation in a prompt, efficient and cost effective manner.

NOTE: This brochure provides general information and is not intended to be a legal opinion. Readers are cautioned not to rely on this information without obtaining legal advice with respect to their own circumstances.