Buying Real Estate in New Brunswick
Buying real estate: Good things to know.
For most people in New Brunswick, a home is the largest single purchase or investment they will make. So it’s important to properly understand, and think through, every stage of the purchase decision—from finding the right house at the right price, to finding the right mortgage at the right rate.
Work with a realtor, or go private?
When you buy a home you will have to decide if you want to buy on your own (privately) or work with a professional real estate agent. If you decide to buy on your own, you’ll have to do more legwork—and you’ll want to be extra careful that you fully understand what’s required of you in the process.
If you decide to work with an agent, you have a professional who can guide you through the process. Your real estate salesperson can help decide if it is a good time to buy, help you find the right home, help you negotiate with sellers, quickly complete the large amounts of paperwork home-buying involves, and help you avoid closing issues.
As a buyer, your agent and the seller’s agent split a commission fee — typically 5–6% of the purchase price of the home. This fee is paid by the seller, so as the buyer, you have no agent fee to factor into the deal.
Buying a home is exciting! But it is also a major financial commitment. If you decide to work with a real estate agent, take the time to choose the right agent for you and make sure to contact FCNB to check that both the agent and salesperson are licensed.
Buyer agency agreement
If you choose to work with a real estate agent, you may sign a Buyer Agency Agreement which outlines the relationship between you and your agent and salesperson, including compensation and the amount of time the agreement will be in effect.
A listing agent who also represents the buyer is a dual agent. Agents and their salespeople cannot act as dual agents without providing their clients with a Dual Agency Agreement. Before signing a Dual Agency Agreement, you need to understand what limitations there may be on the services your agent provides. For example, there may be limitations on the information the salespeople are able to share with you, such as buyer and seller motivations, price, and other personal information.
Understand market conditions
In a buyers’ market, there are many homes for sale and fewer buyers, so homes may sell for less than market value. In a sellers’ market there are fewer homes for sale and many people looking to buy, so homes may sell for more than market value. Things like market conditions, how quickly you need to buy and your financial situation should all factor into your buying decision.
What are your home needs and wants?
When you think about the home you want, you probably think about the number of bedrooms and bathrooms, the home style, and neighbourhood. But there’s more to consider. For example, think about what your property taxes will be for the area, the school system, community services (such as fire and police), and how close you’ll be to things like grocery stores and community centres. It’s important to visit more than one property when you’re buying a home.
What can you afford?
Before shopping for a home, consider not only what you can afford today, but also what your future financial position will look like. Remember, the total cost of owning a home is more than just the mortgage payment. Closing costs and other home ownership expenses (such as property tax, home insurance, utilities, and maintenance) should be included into your budget.
Most banks and financial experts recommend that your monthly housing costs, including mortgage payment, property taxes and insurance, be no more than 25% of your take-home income. So add up your income, add up your housing costs, and make sure your housing costs are less than a quarter of your income.
Save for your upfront costs
When you buy a home, there are multiple fees you’ll have to factor in, including:
- Down payment (minimum of 5% of the purchase price)
- Home inspection
- Appraisal fees
- Title insurance
- Water testing
- Legal fees and disbursements
- Land transfer tax
- Property tax or utility bill adjustments (the buyer is typically responsible to repay to the seller any amounts the seller has prepaid)
- Mortgage insurance, if applicable (If your down payment is less than 20% of the purchase price, you will have to purchase mortgage insurance)
- Tax on purchase price (for new constructions)
- Property survey
- Upgrades (for new construction)
Getting a mortgage
Few people have access to the entire amount of money required to purchase a home outright. A mortgage is a loan that can help you finance the purchase of your home. Keep in mind you will still be required to pay a down payment, as well as other closing costs.
Making an offer
You found the right home, in the right location, that you can afford? You’re pre-approved for the mortgage you need? You’ve saved for the closing costs? Great, then you’re ready to make an offer. An offer is a legally binding contract. Signing it means you commit to buy the home. It’s a big decision, so be sure to think it through.
With your agent’s help—if you’re working with one—decide how much money you want to offer. Also decide what conditions you want met before closing the sale. Common conditions include a home inspection, approved financing, the sale of your current home, and a closing date.
The seller may accept, decline, or counter your offer by asking for more money or adjusting the conditions of the offer. Once your offer is accepted, if a deposit was required, it will need to be paid. At this point, you might choose to hire a lawyer who will handle the closing of the sale.
It is important that you understand the conditions of the offer, and who is entitled to keep the deposit if the sale does not move forward as expected.
Closing the sale
Real estate agents and salespeople work with both you and the seller and co-ordinate with the seller’s lawyers to confirm that the transfer of the property to you, the new owner, takes place. Your salesperson may take you on a final walk through of the property prior to closing to ensure that everything is in place. Once the financing and legal work required to close the sale is finalized, your salesperson will provide you with the keys to your new home.