Housing and Property
Planning for Buying a House
So, you’re thinking about buying a house. What are some of the things you will need to know to make a wise choice? This pamphlet is the first in a series on Buying and Selling a House. Other pamphlets in the series are entitled Preparing the Offer to Purchase, Mortgages and Selling your House.
This pamphlet concentrates on one important aspect – planning to buy a house. The purpose of this pamphlet is to encourage you to think and ask questions before you make one of the most important investment decisions of your life. It discusses what to do, what to avoid, who to consult and when. The focus is on the purchase of a home that is currently owned and occupied.
This pamphlet does not contain a complete statement of the law in the area and changes in the law may occur from time to time. Anyone needing specific advice on his/her own legal position should contact a lawyer.
Here are some questions you must consider before even looking for a house:
Everyone has pictured a dream home. Consider however, what you really need in a home. How many bedrooms? How large? Is a family room a must? You will have to decide what would be nice to have and what you must have. Buying a house is not something that just happens overnight. It takes time – and a lot of thought!
The best time of year for you to start looking for a house depends on when you want to move. Planning is essential. Several weeks of exploring may be necessary before you locate a suitable house. Give yourself lots of time.
Before you go house-hunting, you should first decide the best location for your home. Do you need to be close to schools, public transportation, shopping areas, your place of work, recreational facilities? What kind of neighbourhood do your want?
Spend some time driving and walking around the communities and neighbourhoods that you like. Stop and talk with some of the people who live there. Who better to tell you what the neighbourhood is really like?
Look for a home in your price range. Will you have to buy appliances for the house? You must ask yourself, and honestly answer, “What can I afford to buy?”
Set a realistic price range and stick to it. What is your price range? One rule of thumb says the maximum price to pay for a house is 2.5 times your gross (before tax) annual income. What are your normal monthly expenses and what kind of mortgage payment could you comfortably fit into your budget?
Remember, there are many expenses involved in buying a house. You must have the means to cover them. Many financial institutions will help you to look for houses within your budget by approving mortgage financing you can afford before you go house-hunting.
Some of the major expenses, aside from the purchase price of the house, include the following:
You must consider the amount of the downpayment. You will probably need a minimum downpayment of 10% of the purchase price of the house you have in mind.
The Law Society of New Brunswick has published guidelines to assist lawyers and the public to determine what is a reasonable legal fee (tariff) in real estate transactions. The fees charged by individual lawyers, however, vary and are negotiable. Disbursements are always extra. These are the out of pocket expenses lawyers incur on behalf of clients.
Real property transfer tax
In New Brunswick, the land transfer tax payable is currently ¼ of 1% of the assessed value of the property or consideration for the transfer, whichever is greater. For example, on a purchase of a house assessed to be worth $100,000, the tax payable is $250. The purchaser must pay this special tax, or else the deed cannot be registered.
Real property taxes
You will have to pay the real property taxes remaining on the property for the balance of the year. If the seller has prepaid the taxes for the year, you must pay back the seller for your share.
Building location survey
A building location survey is also known as a surveyor’s certificate or a real property report. It is a diagram of the seller’s property, prepared by a qualified land surveyor. It shows the location of the boundaries of the property, the locations of all buildings, and any easements, or rights of way. A building location survey is not the same as a subdivision plan.
A purchaser needs a building location survey to get a mortgage. The seller is not required to provide one. You will have to order it if none exists, or if an out-of-date survey is not acceptable to the mortgage lender or to you. Shop around for estimates of the cost.
Most mortgage lenders require the buyer to get fire insurance. You must always insure the house you buy for its full insurable value. For better protection you may want to insure the house for the full replacement value.
Moving and other expenses
Get quotes from movers or check the cost of renting a moving truck. Remember you will also have costs associated with hydro hook-up, telephone installation, purchasing fuel, and so on.
Estimate these costs, and add the total to the downpayment needed. This figure will give you an idea of what cash you should have on hand before you make a commitment to buy a house.
Who can help me when I buy a house?
Selecting and purchasing a house is complex. You may want to consider the service of the following people:
• real estate agents
• real estate appraisers or tradespeople
• real estate lawyers
Although you may not consult these people in your early planning, later on they can all play an important role. You should plan ahead to choose and budget for them.
What are real estate agents and what do they do?
Real estate agents are businesses which have license sales people working for them. They help sellers find a buyer for the property they have put up for sale. Very few people buy a home without using a real estate agent. Although buyers may think that real estate agents represent them, in almost all cases, these agents are paid by and work for the sellers.
A real estate agent can keep you informed about the kinds of houses you are looking for as they come on the market.
What roles do real estate appraisers or tradespeople play?
The law states “let the buyer beware” and generally it means just that. When you are buying a house, you will probably be excited and overlook things. It may be wise to plan to have the house looked at by a knowledgeable person before you make an offer to buy it.
In some communities you can hire a qualified real estate appraiser to look over the house before you offer to buy it. An appraiser can tell you if you will be getting value for the money you are going to pay for the house. You may be able to get the advice of a knowledgeable tradesperson, friend or family member to help you judge the state of repair of the house.
Knowing about the value and state of repair of a house may allow you to negotiate a lower purchase price. It will also help you budget for the cost of repairs.
What role does a lawyer play?
Lawyers play an important role in handling the paper work involved in a property transfer. Lawyers also play an important advisory role. They can help you to understand your legal rights and obligations when you buy a house. They can explain what the offer to purchase means and help you decide whether it is in your best interests to sign. They can also help you to understand the financial commitment you will be making.
Choose your lawyer before you submit an Offer to Purchase. You should not wait until after your offer is accepted.
Once you have decided which lawyer to hire, make an appointment to see him or her. Discuss the question of fees including when and how they are to be paid. You should hire your own lawyer and not the same one as the seller.
Public Legal Education and Information Service of New Brunswick (PLEIS-NB) is a non-profit organization. Its goal is to provide New Brunswickers with information about the law.
PLEIS-NB receives funding and in-kind support from the Department of Justice Canada, the New Brunswick Law Foundation and the New Brunswick Department of Justice.
We gratefully acknowledge the cooperation of Consumer Affairs Branch, New Brunswick Department of Justice, New Brunswick Real Estate Council and members of the Law Society of New Brunswick and members of the Law Society of New Brunswick.
P.O. Box 6000
Tel: (506) 453-5369
Fax: (506) 462-5193
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Disclaimer: Please note that our website contains general information about the law. This is not a complete statement of the law on particular topics. We try to update our publications often, but laws change frequently so it is important for you to check to make sure the information is up to date. The information in our publications is not a substitute for legal advice. To receive legal advice about your specific situation, you need to speak to a lawyer.