Alberta’s current economy presents a positive trend for the real estate market, particularly for buyers. It offers an excellent opportunity for Albertans to buy their dream home or invest in real property. While it may be tempting to buy properties offered with discounts and concessions, it also enhances the possibility of new buyers to err by missing the important considerations in buying a property. Hence, we see an increasing trend in disputes arising out of the sale and purchase of real property.
This note is an attempt to educate the prospective buyers to make an informed decision to purchase real property and be aware of critical blind spots to avoid future disputes.
The following is a non-exhaustive list of pointers to help new buyers in assessing risk and making an informed decision of buying a property:
Preparation Stage: Inform yourself
Informed decision making and calculated risk are keys to a good deal. Before you buy, ask questions such as:
- Why do want to buy? Home or investment;
- What is your budget? Know your savings and then check with two or more lenders to know the amount available for you to borrow (mortgage pre-approvals) You may also want to know the overheads for ownership such as property taxes, utilities, insurance – understand your budget and stick to it;
- What do you want to buy? Condo/Townhome/single family or other;
- When do you want to buy? Know your time frame: 3-6 months/ 8-12 months?
- Do your due diligence: go to the City of Calgary website and understand the community/neighborhood, connectivity, nearby amenities, crime rate etc.;
- Differentiate between wants and needs: you may want to make a hierarchy of your priorities for the property;
- Get a Realtor: Sellers pay for the realtor’s commissions, so having an industry professional assist you in your decision does not cost you anything. Get a Realtor who is a member of National Association of Realtors® and who is familiar with the area and neighborhood you plan to buy.
Stage of Entering the Contract: Read Carefully Before Signing
In this stage, you enter into a written agreement with the seller to buy the property [the Real Sale Purchase Agreement]. It is a critical document that enumerates all terms and conditions of the real estate purchase. If you do not have an understanding of the legal terms and consequences of the agreement, ask you realtor. Also:
- Check the Title of the property to ensure whether the sellers are the rightful owners;
- Also, check with your realtor about the encumbrances on the title that might affect your ability to make alterations to the property;
- If you choose not to use a realtor, always get a lawyer review the Real Sale-Purchase Agreement before you sign;
- You might be making a deposit to show your commitment to purchase the property. Check whether the Agreement acknowledges your deposit. You may also want to request the deposit amount to be held in an escrow account until the closing date of the transaction;
- Check for what forms part of the sale. Homes may include built-in appliances, air-conditioners, centralized vacuuming system washer dryer, dishwasher, etc. Make sure these additional items are listed in the Agreement. If something needs to be fixed, make it as a condition to be fulfilled by the seller before the closing date; alternatively you may also ask for the repair concession from the offer price of the property;
- Do you have any contingencies for your purchase? For example, if you are upgrading yourself and want to sell your existing house and getting a new place. Any such contingency must form part of the Agreement. This will give fair notice to the seller on your offer to purchase, and will also give you an exit from the deal if you are not able to sell your current house within time;
- Check over and over again whether the offer price and settlement date are correct.
- Check for the time frames for inspection of the property. During your inspection, ensure whether all appliances, plumbing, and heating are in working condition. It is advisable to hire an inspector to examine the property before signing the Agreement;
- Discuss with the seller and your realtor about the seller’s consequences of withdrawing from the sale. Evaluate your risks before signing the Agreement;
- Arrange for a walk-through of the property a day before the closing date or possession to ensure that everything is the way as agreed;
- It is advisable to retain an experienced real estate lawyer for a stress-free and gratifying experience of buying your property.
Post-Possession: A New Beginning
Congratulations!! You have got the keys to your new property. There are few more things to take note of:
- Change the locks immediately after possession, because you don’t know what’s out there;
- Confirm that all necessary covenants have been removed from the tile;
- Check for the property tax. Give a timely call to your City/ Municipality and arrange for TIPP plan.
- Do not forget to chat with your lawyer for further details.
– Nitin Kumar Srivastava