Chapter 1

Buying and Selling a Home: Just the Basics

IN THIS CHAPTER

Getting to know the experts who can help you buy and sell your home

Buying a home: What you need to know

Recognizing when it's time to sell your home

Answering some questions when you're planning to buy and sell

Any deal involving a home, whether it's buying or selling, is usually a milestone moment in your life. It can be a step into adulthood, the moment you finally move out of our parents' basement, or perhaps a new phase of your career. People often trade up in the size of their home when they change jobs or have children, and they often trade down to a smaller home when their kids leave and retirement beckons. Some people are nomads or serial renovators and buy several homes over a lifetime; others are small-time investors, trading in homes like other people trade stocks.

This chapter gives you a taste of what's to come and helps you navigate the wealth of information we have to offer. Consider it your jumping-off point into the world of buying and selling a home. We introduce you to the key players in the game of residential real estate and the steps in the process. We also raise some of the key questions you'll want to ask yourself when you're thinking about buying a home or selling the one you have.

Knowing the Cast of Characters When Buying or Selling

Buying a home may not involve a cast of thousands, but it's not a solo adventure, either. Several key figures are involved in helping you do the deal, and many of the same people also help you sell your property. Even though you're the one making the decisions, you can count on guidance from experts in the areas of finance, law, and, of course, real estate.

Recognizing who's important when buying

The obvious goal when you're buying a home is finding a property that provides you with the amenities that meet your present and future needs at a price that meets your affordability criteria. You want a peach of a deal, not a lemon. That's where it pays having these people on your side who know how to find what you're looking for, making your money go further, and giving you peace of mind that your purchase is free of defects and won't need immediate expensive repairs.

The real estate agent

The real estate agent, also known by the trademarked term Realtor, is a professional with an intimate knowledge of the market and the types of homes available in a certain market. Working with a knowledgeable agent can mean the difference between a short search and a good deal or a long process that ends up being more trouble than it's worth. We discuss the role of the real estate agent and how to find a good one in Chapter 2.

The lender

Most people require financial help to buy a home. That help usually comes in the form of a loan, known as a mortgage. Having a lender who can provide you with a mortgage that suits your needs is important. Whether you work with a bank, credit union, or mortgage broker, securing a mortgage will be critical to your getting the kind of house you want at a price you can afford. We discuss your options for mortgages, including which source is right for you in Chapter 5.

The appraiser

Most people won't deal directly with an appraiser when they're buying a home, but appraisers are the folks who confirm that the price you're paying is the one you should be paying. The appraiser assesses the fair market value of properties, helping you size up the kind of offer you should make and, more important, letting the lender know whether the home is worth the mortgage you're asking for. Chapter 2 focuses on the role of the appraiser.

The property inspector

The property inspector is a key to avoiding trouble when buying a home. You may think the home has no issues, but the property inspector may tell quite a different story. That could be the difference between saving a few thousand on the purchase price and paying out tens of thousands on repairs. We discuss property inspections in Chapter 10.

The lawyer

Because a home purchase involves a legally binding contract, you'll want to have a lawyer review it. A lawyer - or in some provinces, a notary - will also handle conveyancing, ensuring the documents documenting the transfer of title into your name are in good order. A lawyer focused on real estate will ensure the property you're buying meets the legal description and is free of liens or encumbrances. The lawyer will also help protect you from real estate fraudsters (alas, they exist). Chapter 2 examines the role of a lawyer when buying a home.

Identifying who's essential when selling

Many of the same experts who assist home buyers in purchasing a home (the possible exception is a lender) also assist home sellers. The experts will represent the property in the best possible light to attract the best offers, enabling the seller to pocket some or reinvest the proceeds in their next dream home. Here are the important people:

The real estate agent

A real estate agent can help take a load off your mind by handling the transaction for you. The agent's role includes making sure that potential buyers know that your house is for sale, coordinating viewings, and generally making sure you can focus on preparing for the move. The professional assistance a real estate agent offers will help you achieve the best possible market value for the home in the shortest period of time. Chapter 2 looks closer at the agent's role when selling your property.

The home stager

You may think your home looks awesome, but those mauve curtains aren't everyone's cup of tea. A home stager will prep your home for sale, making it look like something from a TV show, helping it live up to the listing description (and price). Even though a home doesn't need to be staged or furnished with the latest styles to sell, a home stager can help it command a higher price than it would otherwise. We discuss home stagers in Chapter 15.

The appraiser

The appraiser also plays a critical role when selling, because an appraiser's specialty is in determining the property's fair market value. An appraisal will help you establish a fair list price for the property and provide documentation that validates the suggested list price. The appraiser can also let you know about market factors that will help you position the property for sale. We discuss the appraiser's role in selling a home in Chapter 14.

The lawyer

The lawyer, even more than the real estate agent, is critical when selling a home. The lawyer handles conveyancing documents including discharge of the mortgage. If you're selling your home yourself, without a real estate agent's help, a lawyer can review the contract documents and ensure that you haven't exposed yourself to future claims or liabilities. Chapter 2 focuses on the lawyer's role when selling your house.

Preparing to Buy a Home

Buying a home can take a few days or a few weeks, but the typical process has a few key steps that remain the same, including arranging financing, finding a property, making an offer, and closing the deal. These sections look closer at these processes.

Arranging financing

How much home you can afford depends on how much cash you have for a down payment and how large a mortgage you can obtain. Knowing how much you can put towards a down payment and multiplying the amount five times will indicate the size of conventional mortgage you'll need.

For example, a down payment of $100,000 would cover 20 percent of a home bought for $500,000. The corresponding conventional mortgage would be $400,000. However, a variety of other factors may mean the lender only approves you for a mortgage of $300,000. By pre-qualifying for a mortgage, you'll know the price range that will guide your purchasing process. We discuss down payments and preapprovals in Chapter 4.

Finding a home

After you know how much home you can afford, scout the listings to see what's available and where different homes are located. Work with a real estate agent who knows what you're looking for; the agent may be able to give you a head start on your dream home. Chapter 7 discusses the ins and outs of shopping for a home.

Making an offer

Have you found a home you seriously love and that fits your budget? If so, it's time to make an offer. The negotiating process may take a few days, and during this stage you and the seller will hammer out a contract that gets you the home you want at a price that pleases both sides on a timeline that makes everyone happy. We discuss the fine art of making an offer in Chapter 9.

Doing the due diligence

A deal isn't done just because your offer is accepted. There's still plenty of work to do, as we discuss in Chapters 10 and 11. You'll need to make sure that the conditions you've put on the offer are satisfied, including a comprehensive property inspection that doesn't reveal...