Buying your first home can be like piecing together a puzzle. In the beginning, you may not know where to start. But as you become informed, all of those seemingly small yet critically important pieces will begin to come together.
Here are three first-time homebuyer questions that you may not have considered.
Do I have to sign a buyer representation agreement?
The short answer is: No — you don’t have to sign a buyer representation agreement (BRA) with a brokerage. But you should consider its benefits.
A BRA defines the relationship between the buyer (you) and the real estate brokerage you are working with, including the broker or salesperson. It sets out the property type and geographic location for your potential new home, lists the services to be provided, addresses the issue of commission that may be payable to the brokerage, and it also specifies the duration of the agreement.
Signing a BRA confirms in writing that you are a client of the brokerage and documents the terms and obligations of the brokerage-client relationship. As a client, the brokerage has a special responsibility to you, called fiduciary duty, to follow your instructions, protect your confidential information and promote and protect your best interests.
To avoid misunderstandings later on, it’s important list all details in writing. You should also ask what the broker or salesperson expects from you and what your obligations are.
If you’re not comfortable with the terms of the BRA, you can enter into a Buyer Customer Service Agreement with the brokerage. In this scenario, the brokerage will not have to promote and protect your best interests, but they will still be obligated to act fairly, honestly and with integrity, and provide conscientious service. A brokerage can choose to decline your business if you choose not to enter into a BRA.
Do I have to be pre-approved for financing to make an offer on a home?
Again, the quick answer is: No — you don’t have to be pre-approved but getting a pre-approval for a mortgage is a good idea since it will let you know how much you qualify for, and will help ensure you look at properties you can afford.
Pre-approval may also provide you more flexibility to move quickly when you do find the perfect home. Your registered real estate professional can be a good resource to help you budget not only for the purchase price of the home, but all of the additional expenses that come with home ownership.
How do I know what government programs and rebates I qualify for?
There are several government initiatives available to help first-time home buyers. Eligibility depends on a number of criteria, so it’s always a good idea to speak with your real estate agent to determine whether you qualify. A few of the programs:
The Home Buyers’ Plan (HBP), a federal program that allows first-time homebuyers to withdraw funds from an RRSP to help pay for the purchase. Under the HBP, you can withdraw up to $25,000 to use towards a home purchase. If your spouse also qualifies, they can also withdraw up to $25,000, for a total of up to $50,000.
First-time Home Buyers’ Tax Credit (HBTC) is a tax credit that you or your spouse may be able to claim on your annual income tax return. For details, visit www.cra-arc.gc.ca.
In Ontario, the provincial government collects a Land Transfer Tax. You may receive a refund for part or all of the tax. To learn more, visit www.fin.gov.on.ca. Additionally, if you are buying a home in the City of Toronto, there is a Municipal Land Transfer Tax. To learn more about your eligibility for a rebate, visit www.toronto.ca.
As your home-buying puzzle begins to take shape, don’t be afraid to ask questions or seek out more resources. A helpful place to start is RECO’s website — www.reco.on.ca.
Joseph Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to email@example.com . Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps .