Buying a Home? Know the legal consequences and avoid common mistakes

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A home is a significant asset. For many Canadians, it’s the biggest purchase we’ll make, and the process of finding and buying a home can take over our free time. While researching neighbourhood amenities, local schools, and yard sizes is essential, it’s also important to learn about the documents that accompany every real estate transaction. Knowing the legal consequences of the paperwork you sign can help you avoid a bind if the situation takes an unexpected turn.

Placing an Offer

You’ve found the right house—congratulations! Remember that when you place an offer on a property, that offer is a legal contract. If the seller accepts and signs, you’ve got yourself a deal. At this stage, the only way to cancel the contract is by not waiving (removing) your conditions, – that is, the conditions you added to the contract. For this to happen, you must be able to explain why you’re not waiving the conditions.

A condition is not a catch-all excuse for escaping a contract. For example, if your full acceptance is conditional on a satisfactory inspection, you need to show why you’re not waiving it—maybe it’s something your inspector found or certain details in the strata (condo in some provinces) minutes. Having cold feet simply won’t suffice—unless the furnace is broken.

What’s more, never waive or remove your subject to a financing condition, until you have the money. When you remove or waive conditions, you are bound to the contract. Sometimes a bank might take a little longer to finalize a mortgage, even when it’s been pre-approved. Fulfill your due diligence and secure your financing for the specific property you’re buying. If your bank doesn’t give you the final approval in time, ask for an extension of the date by which you must waive or remove conditions.

A condition is not a catch-all excuse for escaping a contract. For example, if your full acceptance is conditional on a satisfactory inspection, you need to show why you’re not waiving it—maybe it’s something your inspector found or certain details in the strata (condo in some provinces) minutes. Having cold feet simply won’t suffice—unless the furnace is broken. What’s more, never waive or remove your subject to financing condition, until you have the money. When you remove or waive conditions, you are bound to the contract. Sometimes a bank might take a little longer to finalize a mortgage, even when it’s been pre-approved. Fulfill your due diligence and secure your financing for the specific property you’re buying. If your bank doesn’t give you the final approval in time, ask for an extension of the date by which you must waive or remove conditions. If the seller doesn’t accept, you lose the deal. It’s a risk, certainly, but it’s not as risky as removing conditions before you’ve secured the funds. Can you imagine being turned down by the bank and having to come up with the money by yourself? I’ve seen this happen and it isn’t fun. You always have the option of private lenders, but those interest rates can be quite high.

Signing Paperwork

Yes, you have signed the offer, but you still need to sign a few more documents:

• Mortgage commitment—After your bank gives you the final approval, they will send you a mortgage commitment with the detailed terms and conditions. Most of the time this can be signed remotely.

Legal documentation—Once conditions are removed, you need to involve a legal representative. At this stage, contact your notary or lawyer (depending on the province you are in) and share the details of your purchase with them. Two or three days before completion, you’ll need to meet in person to review and sign all the documents. If you plan to be away, make sure you leave a power of attorney with someone to sign on your behalf.

Plan Ahead for a Smooth Transition

It’s important to plan your dates in advance. If you are selling and buying, allow at least one day in between so your sale proceeds can go toward your new property. While buying and selling can be stressful on its own, don’t complicate the process by trying to complete both transactions on the same day. The buyer has until 5 pm to release the funds to you, and you have until 5 pm to pay the seller of your new property. So, if your buyer waits until the last minute, things can get stressful. Believe me, I see one of these every week: o (surprise face!). Adding that extra day in between eliminates a factor that’s outside of your control.

Save Money Where You Can

If you’re buying into a strata or condo, make sure you allow at least 10 days to complete after conditions have been waived. This allows for lower strata documents costs. I’ve seen these as high as $500 when ordered last minute.

If buying into a strata property, replacement insurance is automatically included. All we do is update the insurance information with the new owners and new payees. Many people rush to get an insurance policy because they heard they need one, yet it isn’t always required. Of course, you may choose to buy personal insurance to cover contents and possibly the deductible on your strata insurance, but always mention that it is in addition to your strata insurance and give your insurance agent a copy of the existing strata policy, so you don’t pay for overlapping coverage.

If you want to learn more about the legal documents necessary for buying and selling real estate in your area, contact your local notary or legal representative. It’s worth the effort. By understanding the legal implications of placing an offer, removing conditions, signing documents, and setting completion dates, you can shop for homes with more confidence—and less stress.