First Time Home Buyers
Do I need a Home Inspection?
We know that the decision to purchase a home, is arguably the most significant decision you will ever make. Unlike the guarantee a buyer receives with most purchases, there's no money-back guarantee or return policy if you're not satisfied with your recently purchased home. Once you buy a home, you're on your own to maintain it, repair it, anticipate problems and pay the bills. This is why it's best to know as much as you can about potential problems before you make the commitment to buy. While a home inspection might not be necessary in every situation, it is often a useful tool in ensuring you are getting what you pay for. We can answer your questions about home inspections and help determine if one is appropriate in your home purchase.
What Do Home Inspectors Do?
One of the best ways to understand about a home's condition, habitability and safety is to hire a professional home inspector1. A properly trained home inspector will review your house as a system, looking at how one component of the house might affect the operability or lifespan of another. Home inspectors will go through the property and perform a comprehensive visual inspection to assess the condition of the house and all of its systems.
How Much do Home Inspections Cost?
A pre-purchase inspection for a 165 to 205 m2 (1800 to 2200 sq. ft.) home typically takes about three hours and costs under $500. Following the inspection, the buyer is presented with a written report, consolidating the details of the inspection. The home inspector should be willing to answer any questions a buyer might have and to clarify the limitations of the inspection to avoid misunderstandings. CMHC recommends that potential buyers accompany the inspector as the inspection takes place. It can be a valuable learning experience.
How do you find a home inspector?
Check the internet, yellow pages or housing or home trade magazines. Ask friends or family members. Your real estate agent may also make a suggestion. However, beware of this. Under provincial regulations for some provinces, and the code of ethics for real estate agents, such agents are not permitted to recommend or provide the name of only one home inspector. They are, however, permitted to provide a list of home inspectors from which you can choose. The only alliance home inspectors should have is to their professional association and their only allegiance should be to the homebuyer.
Choosing the Right Home Inspector
The more experienced a home inspector is, the more they have seen, the more likely it is they will be able to detect any less obvious problems. Seasoned, professional home inspectors will be full-time home inspectors, not renovators or contractors. Look for people who belong to a provincial association and who have taken some courses, such as defect recognition, building sciences or civil engineering, for example. Professional home inspectors are bound by a strict code of ethics and must adhere to specific standards of practice. Home inspectors should have a general understanding of all the various systems and components in a home. Many have practical experience or a background in engineering, construction and related building trades. Keep in mind that at this time, anyone can become a member of a home inspection association. Many associations have different levels of membership. Being an association member does not necessarily mean that a member has successfully completed the certification process. Check to make sure that the inspector has successfully completed the association's certification process.
What should a home inspector provide following the inspection and when will I receive it?
The home inspector should provide a written report reviewing every major home system and component within 24 hours of the inspection. Exterior components include roofing, flashing, chimneys, gutters, downspouts, wall surfaces and the foundation, including the grading around it. Interior systems include electrical, heating, air conditioning, ventilation, plumbing, insulation, flooring, ceiling and wall finishes, windows and doors. We would be happy to answer any of your questions regarding home inspections. Visit the “contact us” section of our site.
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What is a Survey?
A survey is an overhead line drawing of a parcel of land. It shows the measurements, and boundaries of a property. Licensed Ontario Land Surveyors take careful measurements on site and compare them with the registered titles of the property. Surveys reveal the actual location of the buildings placed on the property in relation to the lot lines. Surveys often detail improvements such as fences, pools, overhead wires, easements and rights-of-way in favour of neighbours or utilities. Surveys detail exactly what buyers are purchasing and, even more importantly, what they may not be receiving.
Do I need a Survey?
Title insurance companies often do not require you to have an up-to-date survey prepared on the purchase of a property. This can mean savings for you upwards of $500. Despite these potential savings, a proper survey is a key safeguard of title and may save you time and money in the long run. Depending on your particular situation, a survey might be something you should consider in your home purchase. Title insurance policies often contain exceptions which will not be covered. These exceptions include defects that could have been discovered by a professionally reviewed title search, and a proper survey. Without a survey, it may prove difficult or impossible for the purchaser to accurately determine the full extent, dimensions and location of the property, and ensure you know exactly what you are purchasing. A survey may not be necessary or appropriate in every case. We can help you determine if you should consider an up-to-date survey in your purchase
Does Title Insurance Replace the Need for a Survey?
Although title insurance may cover errors in ownership or legal title to the property, it will not compensate owners for the risk that a prospective purchaser could back out of the sale at the last moment since good title was lacking, or for the inconvenience of not closing your transaction on time. While title insurance can be a useful tool in preventing many potential problems, a survey will ensure you know what you are buying when you buy it. We would be happy to answer any questions you might have regarding surveys or any other aspect of your real estate deal.
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What is Title to Property?
Title is the legal term for ownership of property. Buyers want "good and marketable" title to a property - good title means title appropriate for the buyer's purposes; marketable title means title the buyer can convey to someone else. Prior to closing, public records are "searched" to determine the previous ownership of the property, as well as prior dealings related to it. The search might reveal, for example, existing mortgages, liens for outstanding taxes, utility charges, etc., registered against the property. At closing the buyer expects property that is free of such claims, so normally they must be cleared up before closing. For example, the seller's mortgage will be discharged and outstanding monetary expenses (such as taxes and utility charges) will be paid for (or adjusted for) at closing.
Sometimes problems (or defects) regarding title are not discovered before closing, or are not remedied before closing. Such defects can make the property less marketable when the buyer subsequently sells and, depending on the nature of the problem, can also cost money to remedy. For example, the survey might have failed to show that a dock and boathouse built on a river adjoining a vacation property was built without permission. The buyer of the property could be out-of-pocket if he is later forced to remove the dock and boathouse. Or, the property might have been conveyed to a previous owner fraudulently, in which case there is the risk that the real owner may come forward at some point and demand their rights with respect to the property.
Who is Protected With Title Insurance?
Title insurance policies can be issued in favor of a purchaser (on new/resale homes, condos and vacation properties), a lender, or both the purchaser and lender. Lenders will sometimes require title insurance as a condition of making the loan. Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.
Types of risks that are usually covered under a title insurance policy include:
- survey irregularities;
- forced removal of existing structures;
- claims due to fraud, forgery or duress;
- unregistered easements and rights of-way;
- lack of pedestrian or vehicular access to the property;
- work orders; zoning and set back non-compliance or deficiencies; etc.
For a risk to be covered, generally it has to have existed as of the date of the policy. The insured purchaser is indemnified for actual loss of damage sustained up to the amount of the policy, which is based on the purchase price. As well, some policies have inflation coverage, which means that if the fair market value of the property increases, the policy amount will also increase (up to a set maximum).
What Does Title Insurance Not Cover?
When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of possible exclusions, which may include:
- Known title defects (that were revealed to you before you purchased your property);
- Environmental hazards (e.g. soil contamination);
- Native land claims;
- Problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought);
- Matters that are not listed in public records (e.g. unrecorded liens and encroachments); and
- Zoning bylaw violations from changes, renovations or additions to your property or land that you are responsible for creating.
You need to carefully review your title insurance policy, as it may include additional exclusions and exceptions that are specific to your property. Title insurance does not provide compensation for non-title related issues. It is not a home warranty or home insurance policy, and will not provide compensation for:
- Damages due to flooding, fire or sewer backup;
- General wear and tear of your home (e.g. replacing old windows, a leaky roof, or an old furnace);
- Theft (e.g. a burglar breaks into your home and steals your television); and
- Other losses or damages due to non-title related issues.
Refer to your title insurance policy for a full list of exclusions, restrictions, and terms and conditions.
How Long is the Insurance Coverage?
In the case of title insurance covering the purchaser, title insurance remains in effect as long as the insured purchaser has title to the land. Some policies also protect those who received title as a result of the purchaser's death, or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.
In the case of title insurance covering a lender, the policy remains in effect as long as the mortgage remains on title. A lender covered under a title insurance policy is insured in the event the lender realizes on its security and suffers actual loss or damage with respect to a risk covered under the policy. Lenders are usually covered up to the principal amount of the mortgage.
The premium for title insurance is paid once (at the time of purchase). Generally speaking, in Canada the purchaser of the property pays for the title insurance, though there can be situations where the seller pays for it. Some policies automatically cover both the purchaser and lender; others will cover both for a small additional fee.
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First Time Home Buyers
Are you a first time home buyer?
If you qualify as a first time home buyer, you may be eligible for a Land Transfer Tax Rebate. This could mean substantial savings. In order to qualify, you must meet the following criteria:
- You must be at least 18 years of age.
- You must apply for your rebate within 18 months after the date of the closing of your purchase. Our practice is to complete the application at the time of closing so that you receive an immediate rebate.
- You or your spouse cannot have owned a home or had any ownership interest in a home, anywhere in the world.
- You must move into the home and occupy it as your principal residence within 9 months of the date of closing.
Can we receive a land transfer tax rebate if only one of the purchasers is a first time home buyer?
The refund amount is reduced when one or more of the purchasers are not first-time home buyers. You will receive a proportionate rebate based on the number of people who are first time purchasers. For example, where a common law couple, one person being a first time home buyer and one having previously owned a home, purchase a home with equal 50/50 interests, a 50% claim of the land transfer tax credit may be claimed. The total claim cannot exceed 50% of the maximum allowable refund. 50% of $2000.00 = $1,000.00.
How much is the land transfer tax rebate?
If you qualify as a first time home buyer you may be entitled to a maximum rebate of $2,000.00 off the Ontario Land Transfer Tax. If you are purchasing a property in Toronto you will also receive up to $3,750.00 off your Toronto Land Transfer Tax.
First time home buyer tax credit
In addition to the land transfer tax rebate, first time home buyers may be eligible for at 15% income tax credit for closing costs. You may be entitled to the following:
- The First-Time Home Buyers' Credit provides a 15% credit on a maximum of $5,000 of home purchase costs (e.g. legal fees, land transfer taxes, etc.), to a maximum refund of $750.
- The credit is claimable for the taxation year in which the home is acquired.
- An individual will be considered a first-time home buyer if neither the individual nor the individual's spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years.
RRSP Home buyer's program
The Home Buyer's Plan may allow you to withdraw up to $25,000 from your registered retirement savings plan (RRSP) to buy or build a qualifying home.
Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. You must occupy the home no later than one year after buying or building the home. You are required to repay the funds to your RRSP over a 15 year repayment period.
If you purchase the home together with other individuals, each of you can withdraw up to $25,000 tax free. If you owned your home more than 30 days before the date of your withdrawal, you will not qualify for the program.
The money must be in your RRSP for at least 90 days before a withdrawal is made to qualify.
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