Summary: 4 Important Questions to Ask Your Real Estate Agent
1. What are closing costs when buying or selling real estate?
Closing costs are the expenses over and above the price of the property, which buyers and sellers normally incur to complete a real estate transaction (your real estate agent should be walking you through the full list of potential costs early on in the process). These expenses are paid on the week of possession in order to exchange keys from seller to buyer.
Buying costs are commonly around 2% of the total purchase price. Expenses incurred may include:
- Cash to Your Mortgage – is the purchase price after deducting your deposit and your lender’s net mortgage advance.
- Land Transfer Tax – is calculated based on the value of the property. Manitoba Land Transfer Tax has a table available online for you, to review what the transfer tax total is based on the purchase price of the property. (Click here to calculate the applicable land transfer tax payable using the Modern Money Mortgage Calculator).
- Property Tax Adjustment – is made between you (the buyer) and the seller’s lawyer to ensure that each party pays their proportional share of the property taxes, assessed for the current calendar year.
- Mortgage Interest Adjustment – you are required to collect interest at your Lender’s rate for 31 days in case there are delays in funding. In almost all transactions, your lawyer will be able to fund on closing and can promptly refund these monies to you.
- Boundaries Verification – refers to the many options available to satisfy yourself and your lender that your new home and outbuildings are on the actual property. Majority of lawyers will recommend you add this cost (around $250) to provide further security during closing.
- Transaction Costs – Legal fees and taxes for your lawyer’s services.
Selling costs are just above 4-5% of the total sale price. These expenses are:
- 4-5% Commission Cost – As seller’s you are the one responsible for paying the listing and buyer’s agent for their marketing, negotiating, prospecting and overall professional real estate services. As agents, the total commission is split by the real estate agent on each side of the transaction (listing and buying).
- Boundaries Verification – refers to the many options available to satisfy yourself and your lender that your new home and outbuildings are on the actual property. Majority of lawyers will recommend you add this $250 cost to provide further security during closing.
- Transaction Costs – Legal fees and taxes for your lawyer’s services.
Other costs can be incurred on closing. This all depends on the specifics within the written offer. However, the breakdown listed above are generally the expenses that you’ll come across whenever buying or selling real estate in Manitoba.
2. I Want to Buy My First Home. Where do I start?
Buying your first home is an exciting process. Whenever I work with buyers, I begin by asking them to create a hierarchy list to help them organize their home buying criteria. This list should contain: budget, location, age, size, residential home or condo, proximity to amenities/work that appeal to the buyer. This list will most likely change as you begin your home search. However, having this completed beforehand will give you a preliminary compass for your exciting journey in buying your first home.
2) Confirming Your Budget
Once you have set your goals, it is vital to ensure you are pre-approved for the home you wish to buy. How do you get a pre-approval? Look to set up an appointment with a mortgage professional at your personal bank/credit union or an independent mortgage professional. Completing this key step in the beginning of your home journey will allow you to search specifically for the homes you are approved for. As a result, this may adjust your search criteria or adjust the timing of your purchase.
3) House Hunting
Now that you know your budget and have a “wish list” for your home purchase, you and your real estate agent will begin home hunting by setting up an auto mailer which will e-mail you listings which meet your search criteria. From there, you will begin to book appointments to visit homes that you’d like to see. Whenever you are ready to write an offer on a property, your real estate agent will assist you in doing so!
3) How does an Offers Date Work?
Depending on areas and price ranges within certain markets, listing agents will use the offers date scenario as an effective way to sell your home. For example, right now there is a shortage of inventory within Winnipeg and an abundance of buyers within the $400,000 and under price range. This is due to COVID-19 delaying home sales within the months of March, April and May due to health reasons and the fact that interest rates are at an all-time low.
Listing agents will plan to under list a property and market it aggressively through their own customized professional marketing campaign. They will declare an offers date immediately so that all interested buyers know that if they would like to write an offer, it is due on that day and time. The amount of time they will plan to give prospective buyers to visit the property ranges between 3-7 days.
When that offers date arrives, the listing agent will present all offers to the vendor. Whenever there are 2 or more offers, you are now in a multiple offers situation, which means that all respective buyers are competing against one another in order to purchase the home. The listing agent will notify all buyer’s agent how many total offers there are on the property and ask them if they’d like to make any changes to their original offer. Communication is important during this step, make sure you and your agent have your cell phones ready.
The listing agent cannot disclose any of the buyer’s offers to any of the competing buyer’s agents, as this would be malpractice. Multiple offers situations work as a sealed bid, so if you are planning on making any changes, put your best foot forward and write a strong offer!
4) What is a Property Disclosure Statement?
The Property Disclosure Statement (PDS) is a tool that is available to buyers to protect their interests. This statement is signed by the sellers and in it they advise that they have disclosed any defects or problems of which they are aware. If a seller is not aware of a problem, it won’t be noted in the PDS. If a seller has not lived in the home, they will not be able to provide a PDS as they cannot comment on the condition of the home.
Your own agent should be able to tell you before you go to see a property if a PDS will be available for the asking. It may even help a house hunter to decide what properties to view. If the answer is “no,” some buyers may wonder what the seller doesn’t want to tell them about the condition of the property. And, of course, a buyer doesn’t have to ask for a PDS. You can just stroke that condition out before you submit your offer. If that happens, a seller won’t have to provide you with a PDS, even if it shows on the listing document that he is willing to provide one. While getting a PDS protects your interests, the decision to do so is up to you. With these changes, more house buyers will be asking for a completed PDS and we’re pretty sure that most sellers will be quite willing to provide them.
After receiving the completed PDS, as long as the buyer is satisfied with what it shows, the contract is complete. By adding the PDS as a schedule or attachment to the Offer to Purchase, prospective buyers will be aware of the type of information they can get from a seller before they make an offer.
While the seller can still refuse to provide a PDS, even if you ask for one in your Offer to Purchase, you will know that in advance, at least if the house is listed or advertised for sale by a registered real estate agent.
David is a REALTOR® working in Winnipeg, Manitoba at Royal LePage Alliance. If you are looking to purchase a home within the near future or have any specific questions regarding the Winnipeg real estate market, please feel free to contact me today using the number or e-mail address below!