Buying a home is a major life decision. One that involves both emotions and finances. And purchasing a green home adds yet one more layer of decision-making to the mix—environmental sustainability. Read this overview to get an idea of the home buying process, then proceed to the other pages of this guide for all the details.
To buy or not to buy?
Buying isn’t all it’s made out to be. According to real estate investor Michael Bluejay, “Most people think the benefit in buying is to ‘stop throwing your money away on rent,’ but in fact the equity you build from buying is mostly offset by the money you will ‘throw away’ on taxes, insurance, maintenance, and mortgage interest, which renters don’t pay. The real benefit from buying is that you freeze your monthly payment for 15 to 30 years, and then you stop paying it altogether.”
So before doing anything, ask yourself if you really are ready to purchase a home. Though you can never be 100 per cent sure, it’s worth taking the time now to figure out whether home ownership is right for you. The decision to rent or buy is a complicated one. There’s a strong argument against buying, even as an investment, so it’s worth understanding the whole picture first.
|| For more on this topic, proceed to part 2 of this guide: Is Home Ownership Right For You? ||
Figure out what you can afford
When deciding on your home buying budget, a good rule of thumb is to multiply your annual household income by three to determine how expensive a home you can afford. (e.g. $100,000 household annual income x 3 = $300,000 home). However, if you’re in a good financial position (strong credit, low-debt, high savings) you’re in a better position to buy a more expensive home.
If your household income is too low and home prices too high, you have a few options, such as reducing your expectations in a home or buying a larger home than your needs dictate and renting out a part of it.
|| For more on this topic, proceed to part 3 of this guide: Home much home can you afford? ||
Decide what you want
Now that you know what you can afford, you can start thinking of the fun stuff: what you want. It’s important to accurately assess what your needs and wants are. Come up with a list of must-haves and nice-to-haves so that when you start looking for a home, you’ve already figured out more or less what you’re looking for, which will likely lead to better decision-making because you’ve thought the decision through.
Green home buyers will want to consider a number of issues that a conventional home buyer normally wouldn’t, such as the economy of resource use, the size of the home’s footprint, and the durability of the home.
|| For more on this topic, proceed to part 4 of this guide: Green Home Buyer’s checklist. ||
Finding an agent
An experienced real estate agent can help find the best home for you, and it doesn’t cost you anything to get one (the seller pays the agent’s fee). Ask your family and friends for referrals. Once you decide what area you’re looking in, find an agent who specializes in green real estate for that area. Ideally, you’ll get referred to a green real estate specialist for the particular area you’re looking in, but if only one of the two, you’re still doing well.
An agent has access to the Multiple Listing Service (MLS) database, which can greatly help you in your search, but bear in mind that agents have multiple clients so can only spend so much time searching around for you. It’s also important to note that agents reap a higher commission when you purchase a more expensive home, so it’s a good idea to take a step back and assess your decision as objectively as possible.
|| For more on this topic, proceed to part 5 of this guide: How to find an agent. ||
Conducting a search
Tell the agent what area you want to live in, how big of a loan you can get and give them your wish list of features to conduct the search with. Then use that information so you can search yourself.
Whether you choose to use an agent or not, it’s a good idea to search around for homes by yourself since more and more homes are being listed on the Internet, both those listed on MLS and not. The Internet opens up a whole market of For Sale by Owner homes that aren’t on MLS and also gives you more control over the home buying process.
Look around at homes
Though home listings can have detailed descriptions and many photos, to really know a home you have to go look at it. So have a look at a few homes that suit your needs. Take your time in each one inspecting them thoroughly before deciding whether it’s right for you.
Make an offer
Before making your offer on a home, get the answers to the following:
- how long has it been on the market?
- how much have similar homes been selling for?
- how flexible is the seller?
You may make an offer conditional upon inspection, obtaining financing or selling your home. Then you can put down the deposit (to be used if the offer becomes firm, otherwise you get your money back).
After you’ve decided on the right home, provide the vendor with an Offer to Purchase, or Agreement of Purchase and Sale. To be on the safe side have your lawyer look at it before presenting it to the vendor.
Find a lawyer/notary
Find a lawyer/notary who specializes in real estate. Claire Sibonney of HGTV recommends finding one that you have a good rapport with since the lawyer/notary’s role is part advisor, part confidant.
Make sure to ask about closing fees, which can add a substantial amount to the purchase price of a home, from 1.5 per cent to even 2.5 per cent for a brand new home.
Just as it’s important to find an experienced real estate agent, it’s important to find a qualified, registered home inspector. As always, it’s best to get a referral, but if you don’t hear about an inspector from someone you trust, ask around, remembering to inquire about the inspector’s experience and professional qualifications. The Canadian Association of Home & Property Inspectors is a self-regulating professional body of home inspectors in Canada that’s recognized for its high standard of home inspectors. Though they are self-regulating, membership in the CAHPI at least assures that the inspector meets or exceeds the Association’s standards of practice.
Once your offer is accepted, visit your lender, who will complete the mortgage application. According to the CMHC, you may be asked to get a property appraisal, land survey and title insurance.
After taking care of the property inspection, appraisal, survey and insurance you’re now ready to close the deal. Here’s where you pay out the down payment and sign the paperwork. And with the deal finalized, the home is yours!
Next section: Is Home Ownership Right For You?