BUYER’S GUIDE

TAB LE OF CONTENTS

I N T R O D U C T I O N

FIRS T T IME HOME BUYERS

G L O S S A R Y

T H E B U Y I N G P R O C E S S

1 - 2

29 - 34

35 - 37

3 - 28

ABOUT VERITY

Everything we do reflects our belief that doing good feels good and produces optimal results for our clients and our communities. We invest heavily into our listings and research/train every week to be better Realtors and better people - we want to be master marketers and more mindful humans. We care about investing into our communities and making Toronto a better place to live — not for PR, but because it feels good.

Let us help.Call us at 416.900.3522NB@VerityToronto.com

2

THE PERFECT HOME

Acquiring the per fect home is a process. This guide is about understanding that process and placing oneself in the most favourable position possible.

4

STEP ONECHOOSE YOUR REAL ESTATE TEAM

You will need a team of professionals to support you throughout the process.

1. The Listing Brokerage / SalespersonWorks with the seller to market a home.

2. The Selling or Cooperating Brokerage/SalespersonWorks with the buyer to help locate the right home.

3. LenderReviews and provides mortgage loans.

4. AppraiserLets the lender know their evaluation estimate of the property.

5. InspectorsProvides basic inspections such as a building, pest and/or environmental inspections.

6. LawyerHandles the paperwork, transfers the home ownership and ensures a good property title.

7. Insurance BrokerProvides the required insurance.

6

STEP TWO CHOOSING A REAL ESTATE AGENT

You can choose the right realtor to help with home buying by interviewing, seeking referrals, and researching prospective salespeople. Since you only work with one agent, it should be someone you like, trust, and respect and who feels the same about you.

8

STEP THREEUNDERSTANDING AGENCY RELATIONSHIPS

Your salesperson is called the Selling Agent or Cooperating Salesperson and will work on your behalf. Buyer Brokerage Agreements detail any responsibility for payment, but they are usually paid by the seller. Representation agreements are now required by law in Ontario.

10

STEP FOURFINANCING, BUDGETING AND MORTGAGES

Request Your Credit Report

Credit reports show your credit history. Request a free copy of your report from Equifax and/or Trans Union Canada to be sure they are accurate and challenge any errors.

consumer.equifax.catransunion.ca

Pre-Qualification

Pre-qualification is the lender’s estimate of your borrowing power determined by your application, credit history, income and debts.

Pre-Approval

Pre-approval formalizes the estimate and concludes with a letter or certificate of commitment from a lender that confirms approval for a specified amount at specified terms.

Total Down PaymentThis is the amount of money you have to invest in a down payment and closing costs. If you already own a home, your equity can be added to this total. You can determine an estimation by talking with your lawyer or financial advisor.

12

STEP FIVEHOUSING STYLES

Toronto’s housing stock is diverse. Most neighbourhoods offer a variety of housing styles such as single-family homes and condominiums, as well as a choice between existing, new construction, or renovated homes. If green features are important to you, a Verity Real Estate Agent can help you find a housing option that fits your needs.

14

STEP SIXFIND YOUR HOME

Creating a Wish ListHome purchases require some compromise, which is why you must prioritize your needs and wants before beginning your search. Share your wish list and your price range with your Verity salesperson so they can find properties that fulfill your requirements. Keep your Verity Real Estate Sales Representative advised of any changes to your requirements.

Look at EverythingAll listed homes can be shown by your Verity Real Estate Sales Representative. As you inspect various homes, narrow your search to specific parameters and assess alternative housing styles, configurations and conditions. Discuss your impressions and reactions to properties with your agent in a frank and direct manner.

Using the InternetIf you’re searching for a home in Toronto, our online Collab tool is the ultimate search platform. Sign up to customize and manage your search, receive e-mail updates of new listings as they become available, conduct several searches at once, and save properties you wish to see.

Collab is Toronto Real Estate Board’s home search tool. Search the MLS in real time and find out about new listings through instant notifications. Communicate with your Verity agent by making comments on a listing that get conveyed automatically.

“The Right House”The goal is to feel comfortable directing your Verity Real Estate Sales Representative to proceed with the purchase of the right property when you see it since timing is critical. There are several offer strategies that can be used.

16

VERITY ADVICE FOR HOME BUYERS

1. Location, location, location!Buy into a location that you predict will be equally attractive in the future when you may need to sell.

2. Check out the schoolsThe school district is important even if you don’t have children.

3. Energy efficient houses save thousands of dollarsIf the house isn’t energy efficient now, make changes once it’s yours.

4. Trial-run your commuteDrive, walk or use “the better way” to get to work during peak periods to see if the commute is bearable.

5. Buy a fixer-upper to increase your equityYour Verity Real Estate Sales Representative can tell you which renovations reap the greatest returns.

6. Do a self credit checkCheck for errors on your credit report.

7. Pay off debts and don’t incur more!Lenders are more forgiving to borrowers who have recently been making regular on-time payments.

8. Variable vs. fixedA Mortgage Broker can help you with the pros and cons of a fixed-rate vs. a variable rate mortgage.

9. Buy so you can expandBuy a house that can expand along with your family’s changing needs.

18

STEP SEVENMAKING AN OFFER

Here are the most common elements of an offer:

PricePrice is determined based on comparable listings and sales, and current market conditions.

Mortgage ConditionThis stipulates that you will buy the home subject to obtaining a mortgage in a specific time frame.

Home Inspections ConditionA thorough inspection of the property protects you against structural or material problems. Most times the buyer is responsible for hiring and paying the inspector.

Status Certificate ConditionAllows buyers of condo units to have as much information as possible about the unit as well as the physical and fiscal situation of the building.

DepositThe deposit secures the contract until the closing and will be applied to the down payment and/or closing costs.

Closing DateDate when ownership changes hands. Flexibility can give a buyer a big advantage and can occasionally allow you to negotiate more favourable terms.

CounteroffersThere is often a fair amount of negotiation before both parties are satisfied. Your Verity agent’s experience and market knowledge will be invaluable during negotiations.

20

How to WinSince only one buyer gets the house, stack the cards in your favour by:

1. Knowing the market so that you are in a position to bid high without overpaying.

2. Submitting your best offer during the first round. You may not get an opportunity to improve your offer.

3. Offering a healthy deposit.

4. Accommodating the seller’s requested possession date or offering a seller-flexible possession date.

5. Asking for few, if any, conditions.

6. Proving your ability to close the transaction.

7. Keeping yourself available when offers are being presented for last-minute negotiations.

8. Having faith and trust in your Verity agent so you can make the most aggressive choice based on their insight.

Bully Offers (Pre-Emptive Offers)When sellers list a good property in Toronto’s hot market, they may hope to generate a bidding war. When that strategy is employed, they set a date for interested buyers to submit their offers to the seller for consideration. A buyer, however, may ignore the offer date and submit an offer earlier than requested. This is called a Bully Offer.

Bully Offers must be attractive to sellers in terms and price. Buyers making unattractive Bully Offers can easily offend sellers, disadvantaging their subsequent offer on offer night. Your Verity agent can review the appropriateness of Bully Offer submissions in each situation to determine if it is a good idea.

22

STEP EIGHTTHE ROLE OF A LAWYER

The buying process involves many legalities, so be sure to use a lawyer with real estate experience. Although most transactions close without any problems, an experienced real estate lawyer is invaluable if difficulties arise.

Toronto lawyers typically charge a flat fee for home buyers. Disbursements will be in addition to the quoted fee. Your lawyer will be able to provide you with exact disbursement expenses on your transaction.

What Does a Lawyer Do?Before the offer:• Review offer clauses to help buyers understand

the legal aspects of the offer.

After the agreement is accepted:• Detail exact closing costs.• Search title.• Search taxes, utilities, building and zoning or

order title insurance.• Execution search.• Mortgage and other financing arrangements.• Verify insurance policy documentation.• Calculate land transfer tax.• Request resolution of any problems found

in searches.

A few days before closing:• Prepare Land Transfer Tax formula.• Prepare mortgage documentation,

statement of adjustments, and documentation for land registry.

• Accept closing funds.• Review & have buyer sign

necessary documentation.

Closing day:• Exchange mortgage documentation for money. • Meet with the seller’s lawyer.• Complete final searches.• Transfer funds.• Register deed and mortgage in buyer’s name.• Pay land transfer tax.• Obtain keys from the seller’s lawyer.

After completion:• The lawyer will send you a reporting letter

certifying your title together with the deed, survey, and all other related documentation.

24

STEP NINEINSURANCE

The insurance requirements associated with home ownership can be complex. This section provides a brief overview of the various types of home-related insurance.

1. Homeowner’s InsuranceProtects your home against hazards, as well as liability coverage against injury to visitors. Policies can also protect the home’s contents. Your lender requires homeowner’s insurance in an amount at least equal to your mortgage.

2. Mortgage Life InsuranceThe amount of insurance is equal to the principal amount of the mortgage. In the event of the mortgagor’s death, the balance of the mortgage is paid off.

3. Mortgage InsuranceCanada Mortgage and Housing Corporation (CMHC) insurance protects lenders of high ratio mortgages against default.

4. Title InsuranceEliminates the risks of defective property title. A title claim could be very serious. You would have to pay all defense costs, and a claim could result in complete loss of equity if defense were unsuccessful.

We encourage purchasers to buy title insurance because of the cost savings when hiring a lawyer. With title insurance, your lawyer can skip some of the searches. As municipalities increase their search fees, title insurance becomes even more cost-effective.

26

STEP TENCOMPLETION OF THE TRANSACTION

Shortly before closing, your lender will forward all loan documentation to your lawyer. You will be responsible for bringing the balance of your down payment and closing costs in the form of a certified cheque.

28

FIRST TIME HOME BUYERS

First Time Home Buyers have some wonderful incentives to help ease the cost (and financial strain) of buying their first home. We’ve highlighted some of the most popular incentives that our First Time Home Buyers take advantage of. Be sure to check with your lawyer, realtor and accountant about your specific situation before buying and applying for these programs and incentives.

THE FIRST TIME HOME BUYER INCENTIVE

The First-Time Home Buyer Incentive makes it easier for you to buy a home and lower your monthly mortgage payments. This program is a shared equity mortgage. This means that the government shares in the upside and downside of the property value. It allows you to borrow 5 or 10% of the purchase price of a home. You pay back the same percentage of the value of your home when you sell it or within a 25-year window.

It works like this:

• You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.

• You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.

Just as the name implies, this incentive is for first-time homebuyers. You’re considered a first-time homebuyer if:

• You have never purchased a home before

• You did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January 1 of the fourth year before the Incentive is funded and ends 31 days before the date the Incentive is funded)

• You have recently experienced the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements)

These are a few criteria to determine your eligibility for the First-Time Home Buyer Incentive:

• You have your minimum down payment

• Your total annual qualifying income doesn’t exceed $120,000

• Your total borrowing is no more than 4 times your qualifying income

• You or your partner are a first-time homebuyer

• You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada

The Incentive is like a second mortgage on your home. Your first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium. It also must be eligible through Canada Guaranty, CMHC or Genworth.

3 0

HOME BUYERS PLAN (RRSP WITHDRAWAL)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. The HBP allows you to pay back the withdrawn funds within a 15-year period.

You can withdraw funds from more than one RRSP as long as you are the owner of each RRSP account. Your RRSP issuer will not withhold tax on withdrawn amounts of $35,000 or less. Some RRSPs, such as locked-in or group RRSPs, do not allow you to withdraw funds from them.

Certain conditions must be met in order to be eligible to participate in the HBP, including the following:

• You must be considered a first-time home buyer

• You must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability

• You must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built

• You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it. If you buy or build a qualifying home for a related person with a disability, or help a related person with a disability to buy or build a qualifying home, you must intend that that person occupies the qualifying home as his or her principal place of residence

• In all cases, if you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions.

You have up to 15 years to repay to your RRSP, pooled registered pension plan (PRPP) or specified pension plan (SPP) the amounts you withdrew from your RRSP under the HBP.

Your repayment period starts the second year after the year when you first withdrew funds from your RRSP(s) for the HBP. For example, if you withdrew funds in 2019, your first year of repayment will be 2021.

32

LAND TRANSFER TAX REBATES

First Time Home Buyers who meet eligibility criteria and who are buying homes/condos in Toronto may be eligible for up to $8475 in land transfer tax rebates.

Ontario first-time homebuyer land transfer tax rebate/refund

The Ontario land transfer tax refund is equal to the full value of the land transfer tax up to a maximum of $4,000

Eligibility:

• The buyer must be a Canadian citizen or permanent resident of Canada

• The buyer must be older than 18 years• The buyer must occupy the home within nine

months of purchase• The buyer cannot have owned a home

anywhere in the world• The buyer’s spouse cannot have owned a home

while being your spouse

Based on Ontario land transfer tax rates, the refund will cover the fully taxed amount on houses up to $368,333. For houses over $368,333, homebuyers will receive the maximum $4,000 refund and have to pay the remaining LTT balance. To obtain this refund, you need to apply within 18 months after the purchase of the home.

Toronto first-time homebuyer land transfer tax rebate/refund

First-time homebuyers in Toronto of new and resale homes are eligible to receive a rebate up to a maximum of $4,475.

Eligibility:

• The buyer must be a Canadian citizen or permanent resident of Canada

• The buyer must be older than 18 years• The buyer must occupy the home within nine

months of purchase• The buyer cannot have owned a home

anywhere in the world• The buyer’s spouse cannot have owned a home

while being your spouse

34

GLOSSARY

Adjustable Rate Mortgage (A.R.M.): Mortgage with a

rate tied to the prime rate that is variable.

Agency: Relationship a buyer or seller has with their

real estate agent.

Agreement of purchase and sale (aka offer): Legal

document that outlines the terms of a real estate deal

that will be signed by both the buyer and the seller.

Appraised Value: Amount that a professional appraiser

thinks a property is worth.

Canada Mortgage and Housing Corporation (CMHC):

Institution which administers the National Housing

Act and provides lenders with insurance against high

ration mortgages.

Clear Title: A property with no claims.

Closing Date: Date that the house exchanges hands

from the seller to the buyer.

Cloud on Title: When a claim has been made against

the title of a property.

Collateral: Tangible asset that is used as a guarantee of

payment in a loan.

Common Elements: Parts of a condo building that are

owned by all owners of the building.

Condition: Offer clause which outlines what has to

happen before the agreement becomes binding.

Condominium: Form of ownership where the owner has

the title to a specific unit and a portion of the common

elements of a building.

Conventional Mortgage: Mortgage from a traditional

lender where the value of the mortgage does not

exceed 75% of the value of the property.

Cooperative: Type of ownership wherein the building

is owned by a company. To be entitled to live in the

building, you must buy shares.

Deed: Document that officially transfers ownership of

a property.

Default: When a borrower is not able to make a

debt payment.

Deposit: Money that is put down after an offer has

been accepted and is held in trust.

36

Disbursements: Various expenses and costs

that a lawyer will pay on behalf of a buyer to

close the sale.

Down Payment: Amount that the buyer puts

down on the property in cash.

Equity: Value of the property minus any

outstanding debt.

Fiduciary Duty: Legal relationship between a

buyer or seller and their agent.

Fixed Rate Mortgage: Mortgage that has a

fixed amount of interest paid over a specific

amount of time.

High Ratio Mortgages: Mortgage that

exceeds 75%. These mortgages must be

insured by the CMHC.

Hold Back: When money is held back by the

lender until a condition is satisfied.

Homeowner’s Insurance: Protects

homeowners against damage to their home.

Home Inspection: Objective evaluation of a

house by a home inspector.

Irrevocable Period: The period at the end of

which an offer expires.

Land Transfer Tax: Tax paid to transfer

a property.

Legal Fees: Amount charged by lawyer to

execute the purchase or sale of a property.

Lien: Legal claim against real estate to

guarantee payment of a debt.

Listing Agreement: Formal agreement

between the seller and a real estate

brokerage company authorizing a particular

piece of real estate for sale.

Listing Broker: The real estate brokerage

company that represents the seller.

Lock-in: A buyer tells the lender that they

accept a certain interest rate for a certain

amount of time.

Maintenance Fee: Fee a condo owner

pays each month towards upkeep of the

common areas.

Mortgage: An agreement between a lender

and borrower where the real estate is

collateral for a loan.

Mortgage Broker: A professional who brings

together borrowers and lenders.

Mortgage Insurance: Also referred to as

mortgage loan insurance or mortgage default

insurance, this is offered through CMHC and

covers the lender when a borrower has less

than 25% down payment.

Mortgage Life Insurance: Covers the

mortgage value in the event of the death of

the mortgage holder.

Mortgagee: Lender.

Mortgagor: Borrower.

Pre-approval: A written commitment from

a lender to lend a buyer a certain amount of

money at specific terms.

Principal: Base amount of money borrowed.

Real Estate Agent (Broker): The

brokerage company that represents either

a buyer or seller in the process of buying or

selling real estate.

Realtor: A registered real estate sales

representative or broker.

Refinance: When a new mortgage is obtained

and used to pay off the old mortgage.

Statement of Adjustments: Amount of

money owed at the time of closing.

Selling Broker/Cooperating Broker: The

real estate agent who represents the buyer.

Survey: Document that outlines the property

line on a piece of real estate as well as the

location of any fences, encroachments and

buildings on the property.

Term: Amount of time a lender lends funds to

a borrower.

Title Insurance: Insurance that assures

that the real proper ty remains the proper ty

of the buyer if a claim against the proper ty

is processed.

Title Search: The process of checking

records to ensure the seller has the legal right

to sell the property.

Trust Account: Bank account used by brokers

to keep protected deposit funds separate

from other funds.

Underwriting: Calculation of risk involved for

a lender.

Variable Rate Mortgage: Mortgage with

fixed payments but where the interest rate is

adjusted to market levels.

Warranty: Legally binding commitment to

guarantee that the house is in good condition.

SAGE - VERITY REAL ESTATE LTD., BROKERAGE

416 900 3522

VerityToronto.com

TRUTH IN REAL ESTATE

VerityToronto.com