Trust Account, Inspections, and Appraisals

The Process, Step-by-Step

The Initial Agreement and Deposit.

An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.

Some important tips to keep in mind to streamline the process:

• Keep written records of everything. For the sake of clarity, it will be extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.


• Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process we will keep you constantly updated, so you will always be prepared for the next step.

The Closing.

The closing process involves a real estate lawyer, who will hold the deposit in trust and conduct a thorough title search to ensure the property is free and clear of any encumbrances, such as liens, judgments, or unpaid taxes, by the closing date. They will also ensure that any new encumbrances, like mortgages, are properly registered on the title.

Some properties may have restrictive covenants, which limit certain activities, such as building or parking. Additionally, there may be easements or encroachments, which can restrict how you use your property. Your lawyer will review these details to ensure everything is in order before you complete the purchase.

How to Hold Title.

It’s important to consult a real estate lawyer or tax advisor to determine the best way to hold title to a property. Different methods of holding title, such as joint tenancy or tenancy in common, can have various legal, estate, and tax implications, especially when selling the property or in the event of the titleholder’s death. Understanding these options ensures your interests are protected and can affect how the property is transferred or taxed in the future.

Inspections.

Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the time frame that was agreed upon in the effective contract to purchase. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure). If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or

2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).

3. If further inspection is required, we can recommend an expert to examine the issue more closely to ensure that this does not become a significant issue and cost after the sale.

Appraisal and Lending.

It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.

Condominium or Condominium Corporation Approval.

If the property you are purchasing is subject to condominium or condominium corporation approval, it’s important to request the rules, bylaws, and other relevant documents, such as the Status Certificate from the seller, as soon as your purchase agreement is finalized. Ensure that the application forms and any required processing fees are submitted to the appropriate person at the Condo Corporation, which is traditionally the Property Manager, within the specified time frame. Be sure to complete all forms accurately and legibly to avoid any delays in processing.

If the Condo Corporation requires an interview or meeting for approval, schedule your appointment as soon as possible. Most Condo Corporations will issue an approval certificate before you can move in. Your real estate lawyer will request that the original approval letter be brought to the closing, where it will be recorded along with the property transfer documents.

Property Insurance.

If you’re obtaining a mortgage, your lender will require you to purchase a specific amount of insurance on the property. The required coverage will depend on the lender and the purchase price of the home. You can potentially save hundreds of dollars a year on home insurance by shopping around and comparing quotes. Here are a few ways to save:

1. Consider a higher deductible. Increasing your deductible by a few hundred dollars can significantly reduce your premium.


2. Ask about discounts. Some insurance providers offer lower premiums if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, or fire-resistant roofing. Discounts may also be available for homeowners over 55 or long-term customers.


3. Insure your house, not the land. When determining how much home insurance to buy, remember that the land itself isn’t at risk. Insuring only the value of the house, not the land beneath it, can reduce your costs without sacrificing coverage. After a disaster, the land remains, so there’s no need to include it in your insurance calculation.

By taking these steps, you can ensure that you’re getting the right coverage at a competitive price.

Closing.

The buyer should be aware of property taxes. At closing, you will be responsible for reimbursing the seller for any prepaid property taxes, calculated based on the closing date. Property taxes are typically billed annually or semi-annually and vary by municipality. They help fund local services such as schools, road maintenance, and emergency services.

When budgeting for a home, it’s important to consider your ongoing property tax obligations, which are based on the assessed value of your property. In some provinces, property assessments are conducted annually, while in others they occur every few years.

If you are obtaining a mortgage, some lenders may require you to include property tax payments in your monthly mortgage payment, where the lender will hold the funds in a tax account and pay the property taxes on your behalf when they are due.