Clay Jarvis
Beth Buczynski
Searching for real estate is about more than simply finding a property you think you’ll be happy in. That’s the easy part.
A complete and satisfying real estate search — one that ends with you moving into your new home — is a little more involved. It requires time, effort and some careful thought.
But by breaking your real estate search into steps, you can demystify the homebuying process and get yourself organized for the challenge ahead.
Searching for real estate: 10 basic steps
- Step 1: Calculate how much home you can afford
- Step 2: Find a real estate agent
- Step 3: Search for your new home
- Step 4: View the properties that interest you
- Step 5: Get a home inspection
- Step 6: Make an offer on a house
- Step 7: Get a real estate lawyer
- Step 8: Get a mortgage
- Step 9: Close on the property
- Step 10: Enjoy life as a homeowner
Step 1: Calculate how much home you can afford
Years of low supply and raging demand have driven home prices out of reach for many Canadian buyers. It’s a frustrating reality, but it’s one that’s better to accept at the beginning of your real estate search. There’s no point getting your heart set on a property you can’t afford.
The quickest way to get a general idea of your budget is to play around with a mortgage calculator to estimate your monthly mortgage payment. At this stage of the game, you might not know the exact figures to put into a calculator, but that’s alright. Try this:
- If your down payment savings are modest, insert a home value that’s under $500,000, which will allow you to purchase with a 5% down payment. If you have a nest egg that would allow you to put down 7.5% on a property worth between $500,000 and $999,999, you can experiment with any value in that price range.
- For mortgage term, type and interest rate, try several different combinations. You’ll not only get a range of outcomes, but you’ll also see just how much impact a few basis points difference on a mortgage interest rate can have on the overall cost of a mortgage.
- Compare the resulting mortgage payments to your monthly earnings. If the payment amount fits comfortably into your budget, you might be ready to move on to Step 2.
Another way to determine how much house you can afford is to talk to a mortgage specialist and get pre-approved for a home loan.
A mortgage pre-approval is an estimate of how much a lender will provide to fund your home purchase. It may not tell you the exact amount you can borrow, but it will give you an idea of the price range you’ll be working with.
Step 2: Find a real estate agent
Technically, you don’t need to engage the services of a realtor, real estate agent or broker when you buy a home. You can do it yourself and just get a real estate lawyer to look over the relevant documents when the time comes.
But real estate agents can save you a lot of time when it comes to finding properties that fit your needs. Experienced agents know their local markets, too, and can tell you which neighborhoods may be more likely to see price increases. They can also help you negotiate if you find yourself competing with other buyers.
Finding the right real estate agent can be difficult, especially if you’re in a major city that could have thousands to choose from. Here are a couple of ways to narrow the search:
- Reach out to friends and family. The easiest way to find a licensed real estate agent who does good work is to find one who has already satisfied people you trust. A steady stream of referrals is the sign of a good realtor, so if you find yourself interviewing a few, ask them what percentage of their business comes from referrals and word of mouth. The higher the number, the more comfortable you can feel.
- Consult the internet. In addition to searching for local realtors online and reading the reviews they’ve received, you can also find them on realtor.ca or by searching the websites of your provincial real estate association. You can even check an agent’s credentials and licenses to make sure they’re legally qualified to help you find a home.
Finding a real estate agent early on means you’ll have a professional in your corner who can help answer all of your questions. And, as we mentioned before, they can make Step 3 a lot easier.
Step 3: Search for your new home
Now it’s time to have a little fun and start actively looking at properties in your budget.
If you’ve retained the services of a real estate agent, they’ll be keeping an eye out for homes that fit your spending limit and tick the boxes on your dream home checklist. But you can get in on the fun, too.
Of all the online home searching resources to choose from, Realtor.ca will likely give you access to the most properties. Operated by the Canadian Real Estate Association, Realtor.ca is where agents across the country post their listings.
But you don’t have to limit your search to one site. Similar tools are offered by private companies and nationwide real estate brokerages, too.
Step 4: View the properties that interest you
Drone footage and 3D technology can provide enough information for some buyers to bid on a home sight-unseen, but these are usually savvy, well-funded investors who are evaluating properties based on specific criteria — or planning a tear-down.
Buying a home that you plan to inhabit means seeing it in person and imagining what life there might be like. Is the kitchen big enough for the kind of cooking you do? Are the “needs a little TLC” blemishes something you can live with until you’re ready to fix them up? Is the basement big enough for your girlfriend’s drum kit?
Viewings also create an opportunity to ask questions you might not have thought of while sighing wistfully at the photos in a home’s listing. Ask your buyer’s agent every question that comes to mind, no matter how basic it might be. If they don’t know the answer, they can ask the seller or the listing agent.
If you’re buying a newly built or pre-construction property, this is a good time to take a long, hard look at what’s covered by the builder’s new home warranty.
Step 5: Get a home inspection
Whenever Canada’s housing market starts boiling over, anxious buyers can feel pressured to make sure a purchase goes through as quickly as possible. One step that frequently gets passed over is getting a professional home inspection.
But make no mistake, a home inspection is a critically important part of your overall real estate search. A home inspection involves a trained, third-party professional looking carefully at a home’s various components — the wiring, the foundation, the roof, the plumbing — to make sure everything is working properly, and in accordance with safety standards and local bylaws.
Buy a home without an inspection and you don’t really know what could be hiding behind the drywall.
If no problems are identified, a thorough home inspection provides peace of mind. If issues do come to light, it gives you an opportunity to either reconsider buying the property or adjust your offer accordingly.
Step 6: Make an offer on a house
Making an offer on a home is a big deal, both emotionally and financially. Not only are you placing yourself in a scenario that can lead to joy or disappointment, but if your offer is accepted, you’re legally bound to buy the house.
Offers can be complex. In addition to establishing a sales price, they also determine the closing date and any conditions the buyers and sellers agree upon.
Your offer should be based on your budget and what your realtor thinks the home in question is worth in the current market. It could be that the home is priced too high and should sell for less than it’s listed for. It could be priced appropriately and sell for close to, or a little higher, than list price.
Some homes, however, are priced well below market value in the hope that the property sparks a bidding war. Bidding wars are risky for buyers. They can be highly emotional contests that drive the price of a home way beyond its market value.
If you find yourself in a bidding war, resist the urge to go over your established budget. If you do, and then aren’t able to secure a mortgage large enough to cover your bid, you could be in a world of legal and financial trouble.
Step 7: Get a real estate lawyer
Once an offer has been accepted, you’ll need to find a real estate lawyer to handle a few important behind-the-scenes duties for you: holding your deposit in escrow and conducting a title search.
The deposit, which is typically non-refundable, shows the sellers that you’re serious about purchasing their home. The title search ensures the home is being sold by its rightful owner. Your lawyer can also help you secure title insurance, which protects against undisclosed property title issues, like unpaid property taxes.
Your real estate lawyer will also play a role later on in the home buying process, so it’s important to find an experienced professional you can trust. Your real estate agent or mortgage advisor should be able to recommend a few for you to choose from.
Step 8: Get a mortgage
You’re getting a little closer to bringing your real estate search to a close. It’s time to choose a mortgage lender and get serious about financing this major purchase.
Apply
First, you’ll have to officially apply for a mortgage. It doesn’t have to be with the lender that provided your pre-approval. If, during the last few steps, you found a lender with lower rates or fewer fees, you can apply with them instead.
When applying, you’ll have to provide a lot of details about yourself and your finances, including:
- Employment and income verification.
- Credit history and debt information.
- Property details, including the price and any fees and taxes you’ll be paying.
- Proof of down payment.
Get a home appraisal
A home appraisal is like a home inspection, only the appraisal determines the value of a home, not just its condition.
Lenders want to be sure you’re not overpaying for a property. If you do, and you have to sell it suddenly, the amount you get in the resale may not be enough to cover your outstanding mortgage amount.
The same scenario applies in the unlikely event you default on your mortgage and the lender takes possession of the home. They’ll want to sell it for as much as they can, but if you overpaid for it and the next batch of buyers realizes this, your lender may have to take a loss.
To avoid this, your lender will require an appraiser to evaluate the property and ensure the amount you borrow is in line with its market value — not necessarily the offer you made. If you make a wild bid that’s both way over asking and out of touch with the market, you could have trouble qualifying for a large enough loan. Not only might you lose the property, but you could get sued by the sellers for not closing the deal you agreed to.
Review and sign your mortgage
Depending on how busy your lender is, the final approval of your mortgage could take a few weeks. Once it comes through, you’ll need to read through all documents with your mortgage advisor to ensure you’re on board with all the charges and the payment schedule you’ll soon be on.
At this stage, you may even be able to do a little last-minute negotiating to see if you can pay a slightly lower interest rate. It never hurts to ask.
Step 9: Close on the property
On closing day, the day you’ve agreed to take possession of your new home, you’ll once again require the services of your real estate lawyer.
Once the lawyer receives the mortgage funds from your lender, as well as your down payment and any relevant closing costs, they’ll pay the seller and register the home in your name. Then the deed and the keys will be yours.
Step 10: Enjoy life as a homeowner
Life as a homeowner means new expenses and a few challenges, but that doesn’t take anything away from the fact that buying a house in Canada is a huge accomplishment. That’s something you’ll be reminded of every time you open the door and step inside.
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