There are a million different reasons why people sell their homes, but every seller has one thing in common: the desire to get as much money as possible from their existing residence as quickly and as hassle-free as possible. (If your home is your principal residence, you won't have to pay capital gains tax on any profits from the sale. If, on the other hand, it is an investment property, prepare for the tax man!) Before you begin the selling process, really evaluate why you're moving. Do you have too few rooms, or too many? Has your job moved to another city and you're relocating? Are the neighbours driving you away? Or are you simply looking for a change? A complete analysis of your current position will set a good foundation for your next home hunt.
Buy or Sell First?
Buy or sell first? That's tricky. After all, if you find a purchaser for your existing home, before you've found a new one, you may find yourself living out of a suitcase if convenient closing dates cannot be negotiated. On the other hand, if you find your dream home before you have sold your existing home, you may be faced with carrying two mortgages for a time. So how do you manage? Easy. Do your homework and have a good idea about the neighbourhood and type of home you're looking for. Do an honest evaluation of your family's needs and budget. Speak to your sales representative and start your new home search as soon as your existing home hits the market. If you've found a home, before you've sold your existing one, use "sale of your existing home" as a condition on your offer. If you don't sell your house within a fixed period of time, you can choose not to go through with the offer. This, however, is a difficult condition for many vendors to agree upon and you may find that you have to forgo your price negotiating power. Purchasing a home before you sell could be a risky strategy if you're counting on the proceeds from the sale. If you've found a purchaser before you've found your next home, use "purchase of a new home" as a condition when you sign back the agreement. Again, it will only be for a fixed time. Even if you have not found the ideal next house by the time the deal closes, you may still wish to proceed with the offer. As a buyer with a "sold house" you will be in a better position to negotiate
Make Your House More Sellable
While we all believe that our home is our castle, our personal tastes may not appeal to everyone. Your sales representative will work with you to give you an impartial analysis of your home - how it relates to other "competing" homes on the market and how your home reflects current design and style trends. Your sales representative will also take a good look at the general condition and upkeep of your dwelling. Overall, your sales representative will work with you to position your home on the market so that your sales experience will take place as expeditiously as possible.
Advertise Your Home on Various Internet Real Estate Portals
Your home will be advertised on many Internet Real Estate Portals to ensure that the details of your home will be seen by a large number of potential buyers.
Arrange Showings
In addition to giving your home the once over with a mop and dust cloth, have your sales representative prepare a home feature sheet. This is a one-page synopsis of your home that highlights lot size, room dimensions, features and upgrades as well as utility costs and taxes. Prospective buyers will take a sheet and refer to it while viewing your home. Plus, it makes for a great reference sheet when the buyers are comparing properties. The Open House: This is usually not a pleasant experience. The upside is that you usually won't have to be there to act as a guide. The downside is that you might have a series of open houses over a few weeks, with people poking through all areas of your home. And you'll have the constant pressure of keeping your home looking its best. The Viewing: When a sales representative has a client who is interested in your home, they will first call to make an appointment with your sales representative. If you're lucky, you'll have time for the last-minute tidying. Of course, you can say no if the prospective purchaser wishes to come at an inconvenient time. During the viewing, make sure you give the viewer and the sales representative a feature sheet and get the sales representative's business card. Give viewers the freedom to wander around your home by themselves. Following may make them uncomfortable. The sales representative will stay with the prospects to offer some protection against theft or property damage.
A sales representative is a trained professional who knows all aspects of the real estate market, and can save you time, money and aggravation. As with purchasing a home, you want to list with the sales representative who is the expert in your location. After all, potential purchasers will be calling this same “area expert” to inquire about houses for sale. There will be a few sales representatives who are knowledgeable about your neighbourhood. Call them up and interview them. You need to feel comfortable with him or her, after all, they will be working for you.
Should You Go With a Non-Exclusive or Exclusive Listing Arrangement?
If you enter into this type of arrangement with your sales representative, you are giving him or her the exclusive right to find a purchaser for your home. With this type of agreement, no other sales representative will bring potential buyers to your home, because only the listing sales representative is entitled to the commission. You may consider this type of arrangement in a Sellers' Market during which time there are more people interested in purchasing a home than there are homes available.
Understand Market Conditions
The real estate market is in constant flux, not only as a whole but in particular areas as well. Knowing what is going on in the overall and local real estate markets will help you understand how these conditions can affect the sale of your home. We've designed the following comparison to help give you an overview of the three significant market positions. When you meet with your sales representative, ask about the current state of the market.
Buyers' Market:
The supply of homes on the market exceeds demand.Characteristics: High inventory of homes. Few buyers compared to availability. Homes usually stay on the market longer. Prices are stable or perhaps dropping. Implications: Buyers spend more time looking for a home, and when they negotiate, they usually have more leverage.
Sellers' Market:
The number of potential buyers exceeds the supply of homes on the market. Characteristics: There is a smaller inventory of homes with many buyers. Homes sell quickly. Prices usually increase. Implications: Prices may be higher or perhaps climbing. Buying decisions must be made quickly. Conditional offers may be rejected.
Balanced Market:
The number of homes on the market is roughly equal to the demand. Characteristics: Demand equals supply. Sellers accept reasonable offers. Homes sell within a reasonable time period. Prices generally remain stable. Implications: There is less tension among buyers and sellers. There is a reasonable number of homes to choose from.
Home Improvements
It simply makes sense to clean up both the interior and exterior of your home before listing it for sale. But that doesn't mean you have to undertake major home renovation projects on order to sell your home. With a little effort, you can increase the perceived value of your home by a great margin. Here are some simple things to keep in mind that you can do to increase the perceived value of your home and make the perfect first impression.
Exterior of Home
- Keep lawns cut
- Trim hedges and bushes
- Weed and edge gardens
- Clear driveway and clean stains
- Clean out garage
- Power wash home exterior
- Touch up paint
- Plant colorful flowers
At The Front Door
- Clean porch and foyer
- Ensure doorbell works
- Repair any broken screens
- Fresh paint or varnish front door
- Repair any damages to the door and/or locks
Setting the Right Mood
- Make sure your home smells fresh and clean
- Turn on lights
- Turn on air conditioner/heater
- Open the drapes
- Light the fireplace
Maximize Open Space
- Clear halls and stairs of clutter
- Clear kitchen counter and stove top
- Clear closets of unnecessary items
- Remove empty boxes and storage
- Put away personal photos so buyers can envision the house as theirs
Maintenance
- Repair leaking taps and toilets
- Clean furnace and filters
- Tighten door knobs and latches
- Repair cracked plaster
- Apply fresh coat of paint or touch up where necessary
- Clean and repair windows
- Repair seals around tubs and basins
- Replace defective light bulbs
- Oil squeaking doors
- Repair squeaking floor boards
Squeaky Clean
- Clean and freshen bathrooms
- Clean fridge and stove
- Clean around heating vents
- Clean washer and dryer
- Clean carpets, drapes and window blinds
- Eliminate pet odors and stains
Closing is a time of packing and organization. Be sure you do not pack anything that you agreed to sell! Unless you specifically mentioned certain fixtures, everything must remain in place. You are responsible for handing over the home in the same condition it was at the time of closing. This applies to everything that was in the agreement. If the home suffers a major disaster, you are responsible for telling the buyer, at which point the buyer may walk away from the deal and have the deposit returned. The buyer may also choose to close and receive any insurance proceeds. In this unfortunate event, remember not to make any repairs until you find out what the buyer wants to do.
The Closing
Once signing the agreement, both the seller and buyer are under a legal obligation to close. If you decide not to for whatever reason, the buyer has the right to sue. If the buyer decides to walk away from the deal, you can claim the buyer's deposit or sue for damages.
AMORTIZATION
The period of time required to reduce the mortgage debt to zero when all regular blended payments are made on time and provided the terms (payment and interest rate) remain the same.
ANNIVERSARY
Most lenders allow borrowers to make a payment on the anniversary mortgage. (For a mortgage assumed on June 1, a payment can be subsequent June 1 for the term of the mortgage). It is applied against principal and is a good way of reducing a loan.
APPRAISAL
A process for estimating the market value of a particular property.
APPRECIATION
The increase in value of something because it is worth more now than when you bought it.
APPROVED LENDER
A lending institution authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only Approved Lenders can negotiate mortgages that require mortgage loan insurance.
ASSESSMENT
The value of a property set by provincial assessors, for the purposes of calculating property tax.
ASSUMABLE MORTGAGE
A mortgage that can be transferred to a new owner. The new owner then assumes responsibility as the guarantor for the unpaid balance of the mortgage.
ASSUMPTION AGREEMENT
A legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or the previous owner.
BALANCED MARKET
Where demand for property equals the supply of available property and usually accept reasonable offers and houses generally sell in sufficient periods. Prices remain stable and there are usually a good number of them to choose from.
BALLOON PAYMENT
The final payment of a mortgage loan when it is larger than the regular payment. It usually extinguishes the debt.
BLENDED MORTGAGE
A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rages.
BLENDED PAYMENT
A mortgage payment that includes principal in interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.
BRIDGE FINANCING
Interim financing to bridge between the closing date on the purchase of the new home and the closing date of the current home, which is sold firm.
BROKER
A person licensed by the provincial government to trade in real estate. Real estate brokers may form companies or offices, which appoint sales representatives to provide services to the seller or buyer, or they may provide the same services themselves. In parts of Canada, brokers are referred to as agents.
BUYER'S AGENT
A person or firm representing the buyer. A Buyer’s Agent’s primary allegiance is to the buyer.
BUYER'S MARKET
When there are a higher number of homes to choose from than buyers. Prices of homes tend to be lower and they remain available longer. Buyers usually have more leverage in negotiating a purchase.
BUYER BROKERAGE AGREEMENT
A written agreement between the buyer and the buyer’s agent, outlining the agency relationship between the two parties and the manner in which the buyer’s agent will be compensated.
CHATTEL
Removable personal items that are not normally included in the sale of a home, but may be added to the purchase price to make the property more attractive to buyers. (Examples include microwave ovens, portable dishwashers, washers and dryers.)
CLOSED MORTGAGE
A mortgage that cannot be prepaid or renegotiated before the term's end unless the lender agrees and the borrower is willing to pay in interest penalty. Many closed mortgages limit prepayment options such as increasing your mortgage payment or lump sum prepayment (usually up to 20% of your original principal amount).
CLOSING COSTS
Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on the closing day. They range from l.5% to 4% of a home's selling price.
CLOSING DATE
The date at which the sale of a property becomes final and the new owner takes possession.
COMMISSION
An amount agreed to by the seller and the real estate broker/agent and stated in the listing agreement. It is payable to the broker/agent on closing and shared, if applicable, among those salespeople involved in the sale.
COMMITMENT LETTER - MORTGAGE APPROVAL
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
COMMON ELEMENTS
The portions of a condominium development owned in common (shared) by the unit owners.
CONDITIONAL OFFER
An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.
CONDOMINIUM
Shared ownership in property. Owners have title (ownership) to individual units and a proportionate share in the common elements.
CONDOMINIUM FEES
A mortgage loan up to a maximum of 75% of the lending value of the property. Typically, the lending value is the lesser of the purchase price and market value of the property. Mortgage loan insurance is usually not required for this type of mortgage.
CONVERTIBLE MORTGAGE
A mortgage that you can change from short-term to long-term, depending on your financial needs.
COUNTER-OFFER
If your original offer to the vendor is not accepted, the vendor may counter-offer. This means that the vendor has amended something from your original offer, such as the price or closing date. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.
CREDIT REPORT
The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.
CURB APPEAL
How attractive the home looks from the street. The first impression you have of a home is important. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.
DEBT-SERVICE RATIO
The measurement of debt payments to gross household income which may include, in addition to the main wage earner’s salary, salaries of other wage earners, commissions, bonuses, overtime, etc.
DEED
A legal document that is signed by both the vendor and purchaser, transferring ownership. This document is registered as evidence of ownership.
DEFAULT
Failure to abide by the terms of a mortgage loan agreement. A failure to make mortgage payments (defaulting the loan) may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgaged property.
DELINQUENCY
Failing to make a mortgage payment on time.
DEPOSIT
Money placed in trust by the purchaser when an Offer to Purchase is made. The real estate representative or lawyer/notary holds the sum until the sale is closed and then it is paid to the vendor.
DEPRECIATION
The decrease in value of something because it is now worth less than when you bought it.
DISCHARGE
The removal of all mortgages and financial encumbrances on the property.
DOWN PAYMENT
The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage. It generally ranges from 5% to 25% of the purchase price but can be more.
DUAL AGENT
A real estate Broker or salesperson who acts as agent for both the seller and the buyer in the same transaction. Both buyer and seller are the agent’s clients.
EASEMENT
This is where someone else has the right for access to or over another person’s land for a specific purpose, such as a driveway or public utilities.
ENCROACHMENT
An intrusion onto an adjoining property. A neighbor’s fence, storage shed, or overhanging roofline that partially (or even fully) intrudes onto your property are examples of encroachments.
ENCUMBRANCE
A registered claim for debt against a property, such as a mortgage.
EQUITY
The difference between the value of the property and the amount owing (if any) on the mortgage.
FIRST MORTGAGE
The first security registered on a property. Additional mortgages secured against the property are “secondary” to the first mortgage.
FIXTURES
Permanent improvements to a property that are normally included with the purchase unless specifically excluded in the Agreement of Purchase and Sale. Examples include wall-to-wall carpeting and built-in appliances.
FORECLOSURE
The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.
GROSS DEBT SERVICE
The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered.
GROSS DEBT SERVICE RATIO
Gross debt service divided by household income. A rule of thumb is that GDS should not exceed 30%. It is also referred to as PIT (principal, interest & taxes) over income. Sometimes energy costs are added to the formula, producing PITE, which moves the rule of thumb GDS to 32%.
HIGH-RATIO MORTGAGE
A mortgage loan higher than 75% of the lending value of the property. This type of mortgage may have to be insured – for example by CMHC or a private company – against payment default.
INTEREST
The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).
INTEREST ADJUSTMENT DATE (IAD)
A date from which the accrued interest on the mortgage advance is calculated and paid in your first regular payment. This date is usually one payment period before the first regular mortgage payments begin.
JOINT TENANCY
The ownership of property by two or more persons who took title at the same time, in the same manner, in equal portions and on the death of one, the survivor(s) retain ownership.
LAWYER FEES
Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers’ fees range widely depending on the complexity of the transaction.
LIEN
A claim against a property for money owing. A supplier or a subcontractor who has provided labour or materials but has not been paid may file a lien.
LISTING AGREEMENT
The legal agreement between the listing Broker and the seller, setting out the services to be rendered, describing the property for sale and stating the terms of payment. A commission is generally payable to the Broker upon closing.
LOAN TO VALUE RATIO
The ratio of the loan amount to the lending value of a property expressed as a percentage. For example, the loan to value ratio of a loan for $90,000 on a home, which costs $100,000, is 90%.
LUMP SUM PREPAYMENT
An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty. A closed mortgage typically restricts the amount and frequency of the prepayments you can make. With an open mortgage, however, you can make a lump sum prepayment at any time without penalty. Making prepayments can help you pay off your mortgage sooner and ultimately save on interest costs over the life of your mortgage.
MARKET PRICE
The price at which real estate sells.
MARKET VALUE
The price which a property will command, from a willing and informed buyer for property offered on the open market, allowing for reasonable exposure, while not acting under duress or unusual circumstances.
MATURITY DATE
The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.
MLS – MULTIPLE LISTING SERVICE
A multiple listing service is a real estate agents’ cooperative service that contains descriptions of most of the homes that are for sale. Real estate agents use this computer-based service to keep up with properties they are listing for sale in their area.
MAINTENANCE FEE
A monthly fee paid by condominium owners for maintaining the development’s common areas.
MORTGAGE
A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal (amount borrowed) plus the interest (the charge for borrowing money). The payment may also include a portion of the property taxes.
MORTGAGE BROKER
A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. Appraisal and legal services may or may not be included in the fee.
MORTGAGE LIFE INSURANCE
Mortgage life insurance provides coverage for your family should you die before your mortgage is paid off. This insurance can be purchased through your lender and the premium added to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker.
MORTGAGE LOAN INSURANCE
If you have a high-ratio mortgage (more than 75% of the lending value of the property) your lender will probably require mortgage loan insurance, which is available from CMHC or a private company.
MORTGAGE PAYMENT
A regularly scheduled payment that is often blended to include both principal and interest.
MORTGAGEE
The person or financial institution lending the money, secured by a mortgage.
MORTGAGOR
The property owner borrowing the money, secured by a mortgage.
NET WORTH
Your financial worth, calculated by subtracting your total liabilities from your total assets.
WARRANTY (NEW HOME WARRANTY PROGRAM)
A guarantee that if something covered under the warranty needs to be repaired it will be. If the builder doesn’t repair it, the repair will be made by the organization that provided the warranty.
OFFER TO PURCHASE
A written contract setting out the terms under which the buyer agrees to buy the home. If the seller accepts the Offer to Purchase, it forms a legally binding contract that binds those who have signed it to certain terms and conditions.
OPEN MORTGAGE
A mortgage that can be prepaid or paid off or renegotiated at any time and in any amount without interest penalty. The interest rate on an open mortgage is usually higher than a closed mortgage with an equivalent term.
OPERATING COSTS
The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.
ORIGINATION FEE
A fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
PORTABILITY
An option available on a mortgage that enables the mortgagor to take a current mortgage loan with them to another property without penalty.
POWER OF SALE
Should default occur it is the right of the mortgagee to force the sale of the property without judicial proceedings.
PRINCIPAL
The amount that you borrow for a loan. Each monthly mortgage payment consists of a portion of the principal that must be repaid plus the interest that the lender is charging you on the outstanding loan balance. During the early years of your mortgage, the interest portion is usually larger than the principal portion.
P.I.T.H.
Principal interest, taxes and heating – costs used to calculate the Gross Debt Service ratio (GDS)
PROPERTY INSURANCE
Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be rebuilt if it is destroyed by fire or other hazards listed in the policy.
PROPERTY TAXES
Taxes charged by the municipality where the home is located based on the value of home. In some cases the lender will collect a monthly amount to cover your property taxes, which is then paid by the lender to the municipality on your behalf.
RATE (INTEREST)
The return the lender receives for loaning you the money for the mortgage.
REAL ESTATE
Includes real property, leasehold and business whether with or without premise, fixture, stock in trade, good of chattels in connection with the operation of the business.
REAL ESTATE BOARD
A non-profit organization representing local real estate Brokers/salespeople, which provides services to its members and maintains and operates a MLS system in the community.
REFINANCE
To pay off a mortgage or other registered encumbrance and arrange a mortgage, sometimes with a different lender.
RESERVE FUND
This amount is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs. Setting aside 5% of your monthly take-home pay will give you a well-funded reserve.
ROLLOVER MORTGAGE
A mortgage loan where the interest rate is established for a specific term. At the end of this term, the mortgage is said to “roll-over” and the borrower and lender may agree to extend the load. If satisfactory terms cannot be agreed upon, the lender is entitled to be prepaid in full. In this case the borrower may seek alternative financing.
SECOND MORTGAGE
An additional loan on a property that becomes second in position behind the first mortgage. Generally at a higher interest rate and shorter terms than a first mortgage.
SELLER’S MARKET
More buyers are looking for homes than there are homes for sale. There is a smaller inventory of homes available for sale and many buyers looking to make a purchase. House prices generally increase and homes sell quickly.
STATEMENT OF ADJUSTMENT
A balance sheet statement that indicates credits to the vendor for the purchase price – and any prepaid taxes and credits to the buyer’s deposit, and the balance due on closing.
STATUS CERTIFICATE
Is a certificate that outlines a condominium corporation’s financial and legal state.
SURVEY
A professionally prepared document that provides accurate details about a property’s location, boundaries, size and legal description, as well as any improvements to the property including buildings, fences, etc.
SURVEY OR CERTIFICATE OF LOCATION
A document that s property boundaries and measurements specifies the location of buildings on the property and states easements or encroachments.
TENANCY IN COMMON
The ownership of property by one or more people, which is not passed on as a right of survivorship, but rather is an asset and can be willed.
TERM
The term of a mortgage is the length of time that the mortgage conditions, including the interest rate you pay, are carried out. Terms are usually between six months and ten years. At the end of the term, you either pay off the mortgage or renew it, possibly renegotiating its terms and conditions.
TITLE
A freehold title gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period.
TITLE INSURANCE
Insurance against loss or damage caused by a matter effecting the title to immovable property, in particular by a effect in the title or by the existence of a lien, encumbrance or servitude.
TITLE SEARCH
A detailed examination of the ownership documents to ensure that there are no liens or other encumbrances on the property, and no question regarding the seller’s ownership claim.
TOTAL DEBT SERVICE RATIO (TDS)
The percentage of gross monthly income required to cover the monthly housing payments and other debts, such as car payments.
VARIABLE-RATE MORTGAGE
A mortgage in which payments are fixed, but the interest rate moves in response to trends. If interest rates go up, a larger portion of your payment goes to interest; if the rates go down, more goes to cover the principal.
VENDOR TAKE BACK MORTGAGE
This is where the vendor rather than a financial institution finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller. These types of mortgages, sometimes referred to as take-back mortgages, can be helpful if you need a second mortgage to buy a home.
ZONING LAWS
Municipal laws restricting the use of land for specific purposes.
