First things first. Before you go out to view potential properties to buy, you need to know how much you can spend. By going to your banker first, you need not share your private, and sometimes confidential, information with a REALTOR® or anyone else before you are ready.

The bank will provide you with a written document in the form of a "commitment" as to how much money they will lend to you. You will be informed as to whether or not you require a co-signer. You will be made aware what portion, if any, of your RRSP money you can use to make your purchase, or if you can finance your own purchase through your self-directed RRSP money. (RRSP is a Canadian government registered retirement savings program. The funds often go into mutual funds, or other sorts of investments and yield tax-free income until it is removed. Then, it becomes taxable that year. Under certain conditions, the government allows people to borrow their own money tax free to buy a house, and then the borrower repays it again into a gov't program. In a way, it is like holding their own mortgage. Arrangements for RRSP are made through the banking institution.)

In the states, you will receive a pre-approval letter for a certain loan amount from the bank, but be careful that the bank is willing to modify the letter on short notice to suit the particular house you want to buy. If the amount on the pre-approval letter is too high, the seller might not be as willing to make price adjustments, repairs, etc.

If you are thinking of buying investment property, the bank will guide you through all their requirements and prerequisites. You will find that each institution has different ideas, rules and regulations. By addressing the finance issue prior to looking, when you find the perfect place, you can simply go out and buy it.

When you find the perfect place, chances are you will know it immediately upon setting foot on the premises. You will want to take your time while viewing to reassure yourself that you have made the right decision.

Give your best "negotiable" offer the first time, if you really want this property. Don't treat the negotiation as a game, or while your seller is rebuffing your unreasonable offer, another buyer could slip in and offer the magic amount that will cause the seller to sign a contract. If your offer is changed by the seller, perhaps you can negotiate further. If not, you can choose to find a better deal elsewhere, at another time.

Put it into your contract that you would like the option to view the property again before closing. Whether or not you choose to view again is up to you, but at least you have pre-arranged permission in black and white.

Make a list of everything in the property that you want the owner to leave with the property when he moves out. Regardless of whether these items are in the listing, some things are negotiable, others are not. You will find out fast enough when you make your offer. Don't ask for outrageous things that no owner would normally even consider leaving. Don't assume anything will stay that is not accounted for. Be absolutely specific. eg. the fireplace screen, special lights, outdoor lights, garden accessories, garage door openers, remotes, security systems, mail boxes, window boxes, or door knockers; loose carpets or rugs are not broadloom. What are window coverings? Itemize everything in detail.

If you are buying a condo - is there a locker? what other storage is available? How many parking spots are there? where are they? are appliances included? these ones? or are they to be replaced by some other ones? Are these ones owned by the tenant? Regarding pool accessories, and central vac accessories - what are the accessories? Make a list! A long list! Then, everyone will know where each other stands on these issues. The best surprise is no surprise.

Inspections

Whatever the age of the house you are thinking of purchasing, the best money you can ever spend is to hire a home inspector. Provide the inspector with a list of items you want addressed, and he will add even more. Hopefully, you will be pleasantly rewarded with a perfect report. But, nearly every property has some flaws, so don't be too disappointed.

If there are any major findings, however, now is the time to learn about them. Sometimes the purchase price can be adjusted to accommodate the problem, sometimes the homeowner will have to bear the burden, at other times you will just decide not to make the purchase, based on the findings. In any case, it is better to find out now than later.

Make your offer conditional upon a satisfactory report of the building inspector's findings, no matter how much you have fallen in love with the place.

Insurance

When you are buying firm, with financing already in place, you will want to allow a few days condition to give time for the financial institution you have chosen to do business with, to get an appraiser into the property to do its own evaluation. The bank will find this critical, dependent upon the amount of down payment you are investing into the transaction, and whether or not your financing is to be CMHC insured. (CMHC is a Canadian government mortgage insurance program administered by Canada Mortgage and Housing. This insurance is required by any lender who loans no more than 75 percent of the value of the property. In the states, private mortgage insurance protects the lender who loans 78% of the property's value.

In the states, you will be required to purchase home owners' liability insurance. This covers the home in case of catastrophic loss, and protects you as well mortgage holders from irreparable financial damage as the insurance will allow you to fully fund repairs. In Canada, this insurance only covers the structure of the building, not the contents.

Don't forget to purchase cheap term life insurance to cover your mortgage, especially if you have small children. One case comes to mind where the husband went to the bank shortly after his young wife had died, only to be told he had been the only one insured. If both spouses' income is counted in the qualifying process, there should be life insurance on both partners to protect the mortgage.

Published: December 23, 1998

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