Buying a House or Condo

You’re Ready to Buy a House, Condo or Property. Now What?

Buying any new home or property (house, condo,etc.) means you’ll be making a number of important decisions. Hiring a skilled real estate professional to work on your behalf is invaluable. Their expertise makes certain you understand each and every step of this complex process.

Hiring a Real Estate Professional The Need for Timelines
Educated and Regulated Looking at Properties
Relationship Options Defects & Disclosures
Written Service Agreements Inspections
The Mortgage Professional’s Role Purchase Contracts-  Setting the  terms and conditions
About Your Mortgage Multiple Offers
About Your Transaction Defining Your Terms and Conditions
Contact a Lawyer All About Property Insurance

Hiring a Real Estate Professional

It’s a good idea to interview several real estate professionals before you hire one. This way, you ensure open communication and a good working relationship from the start.

Educated and Regulated

Alberta real estate professionals complete comprehensive education before becoming licensed and continue to take mandatory professional development courses throughout their professional career. They are also licensed and regulated by the Real Estate Council of Alberta. 

Relationship Options

Real estate professionals are required to discuss the different types of relationships available. Depending on the one you chose, legal obligations for both parties will vary.

  • Common Law Agency – is a legal relationship established when two parties agree to have one party represent the other party or to provide services on behalf of that party. This common law agency relationship exists between the client and the brokerage.
  • Designated Agency (a modification to common law agency) is when the agency relationship exists between you as the client and a designated real estate professional (or professionals) from a particular brokerage - not with the brokerage itself. The real estate professional (or professionals) you choose is your designated agent from that brokerage.
  • Customer Relationship – a consumer can choose to represent themselves in a purchase or sale when a real estate professional represents the other party. The real estate professional has an obligation to act honestly with the customer, and with reasonable care and skill, but won't owe the customer any fiduciary duties.
  • Transaction Brokerage – allows an agent to work with both the seller and buyer in the same transaction, while treating both clients in an even-handed, objective and impartial manner.

Your real estate professional must also review, complete and give you a copy of the Consumer Relationships Guide . This guide highlights basic information about what you can expect and the responsibilities surrounding each relationship type. It provides information to help you choose a relationship that works best for you. 

Written Service Agreements

Once you select a real estate professional and brokerage to work with, you will be asked to enter into a written service agreement.  This agreement is a contract between a brokerage or designated agent and a client. It says you, as the client, agree to hire the brokerage or designated agent to act on your behalf in a real estate transaction. In return, the brokerage or designated agent agrees to provide you the services specified in the contract and to fulfill various obligations. Written service agreements are mandatory for residential real estate client relationships.

In common law brokerages, individual real estate professionals registered with that real estate brokerage enter into service agreements on behalf of the brokerage and represent the brokerage in the delivery of the agreed upon services.

Written service agreements document the specifics of the services to be provided, along with the relationship between you and your real estate professional. These specifics include:

  • the nature of the services provided
  • responsibilities of parties
  • collection and use of confidential information
  • amount or method of calculating the remuneration (payment) to the real estate professional
  • duration of the agreement
  • provisions for termination of the agreement.

Check out our page on written service agreements for more information.

The Mortgage Professional’s Role

Mortgage brokers are licensed professionals that arrange mortgage applications with lender(s). They can represent the consumer, the lender or they can act as an intermediary. They can also give advice on the lending process and help you understand what you can afford.

About Your Mortgage

A lender might give you a pre-approval letter confirming mortgage amount and financial terms. Pre-approval letters and pre-qualifications are still subject to a lender seeing the property value, verifying financial information and re-checking your credit before committing to advancing the mortgage funds. 

Mortgage pre-qualification or pre-approvals can help you prove to a seller that you’re a serious buyer, and they also allow you to focus your property search on what you know you can afford.

About Your Transaction

Your purchase price includes the mortgage, down payment and any deposit that accompanied the purchase contract (offer to purchase).

When you write an offer to purchase a property, you ’re asked to include a deposit as a sign of good faith. This money becomes part of your down payment - held in trust by the seller's brokerage and eventually going toward the purchase price. If the transaction falls through prior to you satisfying and waiving your conditions, the deposit is usually returned to you.

In addition to the mortgage, consider your down payment amount. If you don’t have at least 20% of the purchase price as a down payment, you’ll be required to insure your mortgage. Financing that exceeds 80% of the property value is referred to as a high-ratio mortgage and requires insurance. This insurance protects the lender in case you're unable to make mortgage payments and the property goes into foreclosure. Ask your mortgage broker for further information.

Along with mortgage and down payment costs, there are also closing costs. These include legal fees for the transaction and mortgage, registration of your mortgage at Alberta Land Titles, property tax adjustments, moving costs, utility deposits, etc. You might also consider title insurance. Contact your lawyer for further information.

Buying and selling property may have tax implications. It’s the seller's responsibility to obtain expert advice (e.g. an accountant) regarding the applicability of GST on the sale of their property.  If you’re purchasing a new home (a home to be built, or one that’s never been occupied), you, as the buyer, pays the GST. The amount owing varies depending on the price of the property. Keep in mind you could be eligible for a GST rebate. Builders may ask, or offer, to have the buyer assign the GST rebate to them and reflect this in the purchase contract. Speak to your builder, real estate professional or real estate lawyer if you have any questions.

Contact a Lawyer

A lawyer manages the title transfer and mortgage registration. Property title transfers between sellers and buyers must be recorded at Alberta Land Titles to protect new owners. You’ll sign all documents in the lawyer’s office prior to the possession date. It’s best to find a lawyer early in the buying process and consult them if you have any legal questions. For further information on real estate lawyers contact the Law Society of Alberta.

The Need for Timelines

Time is important. When you make an offer to purchase, that offer (the purchase contract) includes a variety of deadlines - from how long the offer is open for consideration; to the number of days you have to satisfy any conditions (e.g. home inspection, financing, etc.).  If you’re currently renting, review your lease to determine a suitable possession date. You’ll want to monitor these dates closely. Your real estate professional can help you coordinate these multiple timelines. Missing key deadlines could jeopardize your deposit, the transaction or both.

Looking at Properties

It’s important to exercise care when you buy a property. Remember, it’s your responsibility to ensure the property’s condition and suitability meets your needs.

Defects & Disclosures

Sellers cannot conceal defects or mislead buyers about the condition of their property and they must be honest when answering questions. Any material latent defects must be disclosed to potential buyers, whether the seller sells the property themselves or through a real estate professional.

A latent defect or hidden defect is a property fault that wouldn't have been discovered through a reasonably thorough pre-sale home inspection.  A material defect is any property defect that could affect a buyer’s decision to purchase or affect the property’s value - like a cracked foundation.

The following is a brief list of defects:

  • Defects that render a property dangerous or potentially dangerous to the occupants
  • Defects that render a property unfit for habitation
  • Defects that render a property unfit for the purpose which the buyer is acquiring it, at least where the buyer has made this purpose know to his/her industry member representative or the seller’s industry member.

and may include:

  • defects that would involve a great expense to remedy
  • local authority and similar notices received by the seller that prejudicially affect a property
  • lack of appropriate municipal building and other permits for a property

Read our consumer tip on material latent defects for more information.

Inspections

As a buyer, you can include a professional property inspection condition in your offer to purchase. This inspection ensures the property you’re interested in is free of major defects. If instructed, you real estate professional can make your offer to purchase conditional on satisfactory inspection reports.

The Inspection Request Form lists many common types of inspection reports.

Purchase Contracts -  Setting the  terms and conditions

A typical Alberta purchase contract sets out the real estate transaction terms and conditions. You and your real estate professional can modify aspects of the form to reflect specific requirements in your transaction.

When you write the purchase contract with your real estate professional, make sure it reflects all of your needs and concerns regarding your purchase. The sellers will either accept, reject or counter your offer. If they counter your offer, negotiations continue until both parties agree to the terms, or until the offer expires.

Be familiar with the clauses you're including. Ensure you ask your real estate professional and/or legal representative appropriate and applicable questions.

Your real estate professional must communicate the progress of the negotiation with you, but can’t make or accept offers on your behalf unless you give them written authorization to do so.

You should also be aware that, in general:
• offers or counter offers may be withdrawn at any time before acceptance
• withdrawal or acceptance of an offer or counter offer is only effective
when the situation is communicated to the other party, or to the other
party’s real estate professional
• when an offer or counter offer has been accepted there is a binding
contract between buyer and seller, even if it may be subject to certain
conditions having to be satisfied.

Multiple Offers

In a multiple offer situation your real estate professional should explain your options.  It’s important to note that the seller and the seller’s real estate professional don't have to tell you, the buyer, that other offers have been made on the home. But, if your real estate professional learns of multiple offers and their details, they must let you know.  For further information refer to the consumer tip on Multiple Offers.

Defining your Terms and Conditions

As a buyer, you’ll likely write in specific conditions into the purchase contract.

Some condition examples include:

• obtaining satisfactory financing
• satisfactory inspection reports for the condition of the property
• sale of the buyer’s current home
• third party approval of transaction (e.g. parent, employer, lawyer etc.)
• confirmation of tenancy information
• confirmation of renovation costs.

Other purchase contract terms include possession date and the inclusion or exclusion of attached goods (affixed to the home, eg. light fixtures, built-ins) and unattached goods (not affixed to the home, eg. furniture).

All about Property Insurance

In Alberta, risk of loss or property damage lies with the seller until the purchase price is paid. A home can suffer damage from accidental causes (fire, flooding, high winds, etc.) between the entered contract date and the completion date of the transaction - through no fault of the seller.

If loss or property damage occurs prior to the seller receiving the purchase price, then any insurance proceeds are held in trust for the buyer and the seller according to their interests in the property.  As a buyer, you’ll need to arrange your own property insurance prior to possession date.

 

 

 

 

Buying a House or Condo

Related Links

                                                                                

Consumer Tips

                                                                             
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Industry Member Relationships

                                                                             
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Buying & Selling

Consumer Tools

Glossary of Terms

                                                                                

 
 
 
 
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