Buying a home is a complex process; there is very little way around that fact. Especially for first-time home buyers, it is often an overwhelming event. The entire buying process has many different facets, and each component needs a certain amount of knowledge. On top of that, much important decision making is required.
Following are the 7 steps giving an essential overview of the buying process to a first-time home buyer. Each step includes some helpful tips, as well.
Now, in all fairness, this article could be the size of a book. However, we have tried to keep it short, as a starting point for a one-on-one conversation about real estate.
Step 1. Get pre-approved for a mortgage
This is the very first and most essential step when you are thinking of buying a home. Get in touch with your bank or mortgage agent to get properly qualified and pre-approved. This means submitting all the paperwork a lender asks for.
Tips about mortgages:
- Talk to both a mortgage agent and your banker. A bank can only offer their own mortgages, while a mortgage agent has access to many different lenders, including banks and credit unions. It is always good to ‘shop around’ in Canada for a mortgage.
- A mortgage is a big commitment which involves big numbers. Take your time with your mortgage advisor or banker to discuss your options and ask questions when needed.
- A pre-approval letter from a lender does not mean you can exclude a financing condition when writing an offer on a home.
Step 2. Research what homes clearly fall within your budget
Knowing how much you can borrow makes it possible to do proper research. In Calgary, real estate options are plentiful, from condos to townhouses to single-family homes. Learn what type of home fits your budget, in which neighborhoods and find out what works for you.
Tips about researching and budgeting:
- In plain language, get your numbers straight and figure out your personal budget. How much do you want to spend per month? How much money is left after the mortgage, property taxes and utility bills? Remember, you don’t have to spend it all!
- Think about your goals and future plans. Do you want to start a family in the next few years? Do you need to move for work soon? Is your future goal to become a landlord? Will this be your forever home? Those are some important questions that may help determine what type of property you are looking for, and where.
- Learn some important basics regarding buying a home. Think of the paperwork involved, how to write an offer, how to negotiate and how different real estate markets can affect your decisions.
Step 3. Find a realtor to help with the buying process
Especially for a first-time home buyer, it is advised not to venture out alone. A buying realtor does bring value to the table. First, the buying process and the current real estate landscape need a thorough explanation. But, also, a realtor helps to determine the market value of a home, helps to negotiate a fair price, presents the correct conditions during the negotiation process, explains the purchase contract, and handles many other things behind the scenes.
In most cases in Calgary, and we dare to say in more than 99% of the cases, your buying agent is getting paid by the selling agent. This means there is no money out of your pocket, and, additionally, you are better protected. Realize that more than 95% of all transactions in Calgary take place with two agents for clear reasons: to have someone working on your side and to avoid conflicts of interest.
Tips about finding and qualifying a realtor:
- It is a no-brainer that finding a good realtor is important. What are some good traits in a realtor? One who has patience and takes time to explain to a first-time home buyer the process and the pitfalls. One who is honestly working in your best interests, not the interests of a paycheck. Experience is another important trait in real estate. Learn more about how to find a good, qualified realtor.
- Brainstorm your options with your realtor, the advantages and disadvantages of anything real estate related. Discuss your goals and don’t withhold crucial information that may alter any decision. Never be afraid to ask questions. As a first-time home buyer, you are definitely allowed to ask as many questions as you wish.
- Ask the realtor to create a personal portal via the MLS system. This portal includes new listings and also sold prices tell the real value of a home; the asking price does not. The MLS is the source of all homes for sale and sends relevant listings within minutes based on personal criteria. Focus on your possibilities and don’t waste time on anything but that.
Step 4. Selecting a home
Shopping for a home is usually a combination of checking listings via the MLS portal and visiting homes in person, with a realtor. The time this process of home shopping takes depends on many different factors. Home shopping is a fun process. Although, in reality, the fun in home shopping may be ‘bashed’ because of the type of market real estate is in. Think of the intense seller’s market that came out of Covid.
Tips about selecting a home:
- Get a clear picture of what your wants and needs are in your new home. For many, some type of check box list works great. And realize that the perfect home most likely does not exist despite realtors making you believe that it does.
- Also, have your priorities straight between those wants and needs in your new home. Shiny, stainless-steel appliances are far less important than the location of the home, for example. Look through the things you can change with renovations and those things you can’t change, such as location and number of bedrooms in a property.
- Don’t “judge a book” by its cover and don’t always judge a home by photos. Yes, the internet makes many homes shine with wide angle lenses and filters. However, we often also see the opposite. Capturing a home with photos is not always easy. In other words, if in doubt, always plan a personal visit to get a real feel for a home.
- See as many homes as you need. The buying process is different for everyone. Some first-time home buyers need to see a few homes; others need to see 20, 50 or more. Never feel rushed or pressured by a realtor. Realize it is your home, your investment, your future.
Step 5. Write an offer on a home
Writing an offer is both exciting and for many first-time home buyers scary, as well. During the offer process, many items need serious consideration. Think of the price to offer, the negotiation strategy to apply, the conditions that are needed, such as financing and home inspection and condo documentation review, when to take possession, etc.
A realtor negotiates on behalf of the buyer with the seller’s realtor. However, as a buyer, the final decisions are made by you. Most common negotiations are about price, possession, deposit, conditions and terms that need discussion. Negotiations can take hours, days or even weeks, much depending on the type of market.
Tips about writing an offer on a home:
- Read the purchase contract ahead of time and ask your questions ahead of time. It is 6 or 7 pages long, it has very fine print and it contains a lot of legal language. Not knowing what you are signing at the time of offering may create confusion. And knowing exactly what you are signing makes it much easier to focus on those important decisions you need to make.
- Educate yourself about the importance and implications of the decisions you need to make ahead of time. A few examples: understand the difference between a deposit and a down payment, get a sense of what negotiations may involve, what conditions are possible and how can they protect you?
- Get a good sense of the potential impact of the current real estate market. The difference between a seller’s market and buyer’s market can considerably affect many decisions. Read more about the types of markets here.
Step 6. Have a conditional sale in place
At some point, hopefully, both buyer and seller reach an agreement on all points in the contract. Because most real estate contracts contain one or more conditions, the buyer needs to fulfill those conditions in a particular number of days, as negotiated. The most common conditions are about financing, home inspection and condo documentation review.
This means that if one of the conditions is not to your satisfaction, you can “walk away” from the purchase. Then the transaction collapses, the home goes back onto the market, and the search for a new home continues. Some common examples of why a deal collapses are when financing is not approved, or when the condominium corporation appears to be financially unhealthy. Also, the home inspection can reveal some issues which the buyer is not able or willing to take on.
Tips on having a conditional sale in place:
- In Alberta, any verbal agreement is binding, but real estate is the only exception to this law. To make a real estate contract completely valid and enforceable all initials and signatures of all buyers and sellers are required.
- A buyer can always try to renegotiate with the seller on certain items that were revealed in the condominium document review or the home inspection. This may take another round of negotiations. However, “the ball is in the corner” of the seller. If the seller does not want to re-negotiate, it is up to the buyer to either accept the conditions or “walk away” from the property.
Step 7. Having a firm sale and waiting for possession
Once all conditions are fulfilled to the buyer’s satisfaction, those conditions are then removed from the purchase contract. We usually speak of ‘waiving the conditions’ and it means that the contract is now firm.
Once the transaction is firm, the real estate broker will convey the correct paperwork to the respective lawyers. Only 1 to 2 weeks before the possession date, either lawyer will ask their buyer and seller to come to an office to finalize the paperwork. The lawyer executes a long list of items between buyer and seller. An RPR, title, adjustments of monies regarding property taxes and condo fees are just a few examples.
On the day of possession, the buyer’s lawyer will send the amount of the agreed purchase price to the seller’s lawyer. As stated in the purchase contract, the actual hand-over of the keys is at 12 noon. In Calgary, in practice, we see most key releases take place between 11:00am and 2:00pm, depending on the timely transfer of funds.
Tips on possession when buying a home:
- Always choose a real estate lawyer. Their specialization makes for a smoother transaction.
- To find a good real estate lawyer, many realtors are able to offer you several names. Alternatively, ask family or friends for the names of a real estate lawyer recently used. Our take is that you will only find out if a lawyer is as good as promised when issues arise.
- Ask for a walk-through before possession. Between having a firm sale and possession is usually a time span of anywhere between 2 weeks and 3 months. A walk-through gives the buyer the opportunity to make sure the home is substantially in the same condition as when you bought it. One important note; this walk-through must be negotiated within the contract. If the walk-through is not negotiated, a good realtor will refuse the walk-through due to liability issues.
Hopefully, those 7 steps in the home buying process give a very simplified but good overview for the first-time home buyer.
One of the tips mentioned is to educate yourself about some basics regarding buying a home. The question there is, what is important for first-time home buyers to know? In practice, every real estate transaction is different, and every transaction has many different facets to it. Seemingly, not so important decisions actually may have a big impact on the outcome. This is often a legitimate fear, especially for first-time home buyers. So”hit the ground running” and learn some important basics of the home buying process in the next article to be published mid November.
We are Tanja van de Kamp and Ariette van Pelt, working as a team, both buying and selling homes in Calgary. Calgary has been our home since 2004, and real estate our full-time profession since 2009. Tanja was a lawyer in The Netherlands for 12 years, and learned how to negotiate strategically, and to work in the best interests of her clients. Thanks to our honest and transparent approach to real estate and towards our clients, we have built our business.
It’s been a privilege to work with our clients. Over the years, many clients, through their many referrals, have shown their appreciation of us.
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