How to buy a house in 2022
Buying a property is one of life’s most exciting events. With all the information going around this year, and given the changes in the real estate market due to the pandemic, it wouldn’t be surprising for that excitement to be replaced by stress for a lot of people.
With the right strategy, a buyer can realistically acquire their dream property in 2022. The key to a successful purchase, according to DuProprio real estate coach Martin Desfossés, is “Prepare, take an interest and stay active!”
Here are the steps to buying a property in Quebec in 2022.
- Learn about the real estate situation in Quebec
- List your needs
- Set a budget
- Plan your financing
- Check the inventory of homes for sale
- Visit homes
- Make an offer
- Get a mortgage loan
- See a notary
The buyer’s first task is to gather as much information as possible on the current state of the market in the area they want to buy property in. It’s important to take time to find out what documentation is available and to read, be it in newspapers or on specialized real estate websites. And why not get ahead of the game by perusing the documents that will be used during the process: the offer to purchase, the seller’s declaration, the counteroffer, etc.
See the Real estate news section of our blog for the latest market trends.
By understanding that there is a low inventory of properties for sale, a strong demand for them, very quick selling times and a slight increase in interest rates, and by becoming familiar with the strategies that sellers and brokers use, it is possible to purchase real estate that will turn out to be a good long-term investment.
The more aware the buyer is, the more confident they will be and the more informed their decisions will be.
Before starting the search, it’s a good idea for a buyer to list all their must-haves for the new property. Here are a few criteria to think about:
Type of property: condo, single-family house, income property, semi-detached home, new property or one to renovate
Living area: Number of bedrooms, number of bathrooms, size of yard or balcony, swimming pool or garage
Location: City, suburbs, country, woods; neighbourhood, city or town; orientation relative to the sun; view and surrounding noise
Services nearby: Businesses, schools, health services, leisure destinations, activities, shopping
Transportation: Bus, metro, tramway, train, cycling paths, highways, express lanes
Taxes and fees: Condo fees, school and municipal taxes
Certain items may be less critical for some buyers than for others. And some aspects may even be set aside. Every buyer has their own hierarchy of priorities and musts. It’s also important to consider these criteria not only for the short term, but also over the medium and long terms, depending on your plans.
At the very start of the process, it’s important to think about the budget for your real estate purchase. How much can you pay monthly? This amount, calculated honestly and seriously, must be considered the ceiling price when it comes time to buy.
Martin Desfossés, real estate coach with DuProprio, has this advice: “It’s very important to set a limit on the budget before starting home visits, because otherwise, emotions could lead to making an unreasonable decision.”
Calculating your budget of monthly expenses
This calculation must not only include the mortgage payments but also municipal and school taxes, heating, insurance, internet access, renovations, maintenance, a contingency fund, etc.
“If a buyer thinks they can pay $1,500/month for their future home, but would need another $200 to buy, then the solution isn’t necessarily to work more hours. It might be to spend less and more wisely,” explains Martin.
Costs on top of the purchase
When calculating the budget, a buyer must also account for the other inevitable expenses that raise the cost of the transaction. Money must be earmarked for a property inspection, the notary finalizing the transaction, the moving fees and the real estate transfer tax, more commonly known as the “welcome tax.” In addition, buyers of a new home will have to pay up to 14.975% of the purchase price for the GST and QST.
Get the details on all the expenses involved in buying a home.
Getting a snapshot of your financial situation is an important step to take before starting the search for a property. How much is available for the down payment? What is your borrowing capacity? What assistance programs can you benefit from? These are the questions any buyer must ask.
When buying a property, a down payment of at least 5% of the purchase price must be made. It’s best to start putting money aside as soon as a desire to become a homeowner is felt, for instance by paying into a tax-free savings account (TFSA) or a registered retirement savings plan (RRSP). The greater the down payment, the lower the amount to be repaid and the less interest that will accrue.
If the buyer makes a down payment of under 20%, they must take out mortgage loan insurance, for instance from the Canada Mortgage and Housing Corporation (CMHC). The premium is a percentage of the loan amount, usually ranging from 0.6% to 4% of the amount borrowed.
Before applying for a loan, it’s important to know your borrowing capacity. This is a critical step in the process.
It starts with a mortgage prequalification, which will indicate the maximum amount that can be borrowed in the future. This amount is set by a financial or mortgage advisor and is calculated based on salary, assets and debts. This step can also serve as a simulation of the mortgage payments that will need to be made after purchasing the real estate.
Not only does a prequalification guarantee the buyer a rate of interest for a determined period under certain conditions, but it is also usually requested by the seller before agreeing to showing the home. This allows the seller to determine how serious the potential buyer is.
Did you know?
On March 2 and April 13,2022, the Bank of Canada raised its Policy Interest Rate of 0.50%, increasing it to 1%. It also stated that Canadians can expect other increases in the target for the overnight rate during the coming year. For these reasons, it is profitable to shop around for loans and to set an interest rate with a financial institution to protect yourself from a new interest hike.
Martin Desfossés suggests getting a mortgage prequalification for more than one type of property. For instance, even though a duplex has a higher cost, the rent the new owner will collect can often make up the difference on the price of purchase.
Property access programs
For many people, their financial situation is an obstacle to their dream of becoming homeowners. There are many financial assistance and property access programs in Quebec that allow people to save up the down payment to buy a home. This can be very helpful, especially to first-time buyers.
Home Buyers’ Plan
People buying their first home can benefit from the Home Buyers' Plan (HBP). This government program lets first-time buyers withdraw up to $35,000 (per person) from their RRSP without being taxed on the amount. However, the amount must be repaid within a period of up to 15 years after the withdrawal. The details of this program can be found on the site of the Canada Revenue Agency.
Reimbursement of the QST and GST/HST for new homes
A portion of the taxes paid to purchase a new home may be refunded by Revenu Québec, so long as the purchase price is under $450,000. The maximum amount for this refund is 36% of the GST paid, up to a maximum of $6,300, and 50% of the QST paid, up to $9,975.
First-Time Home Buyer Incentive
This Canadian government program offers 5% or 10% of the purchase price for the down payment on a first home. This loan has no interest or payments for 25 years or until the property is resold, which reduces the mortgage payments for the new owners.
Other financial assistance may also be offered by municipalities or community organizations. It pays to do your research!
Once the buyer has gathered information, made a list of needs, finalized a budget and settled the financing, it’s time to start searching for a property! It’s important not to be restricted to a single platform. Creating alerts for your search criteria on all real estate websites means you’ll be advised immediately when new properties for sale are listed.
Did you know?
DuProprio.com is the website providing the best online experience in real estate!1
Since the inventory of properties on the market is low right now, buyers also benefit from touring the neighbourhoods in which they are interested and even knocking on doors of properties they really like, to talk to the owners. In a competitive market, being bold sometimes really pays off!
Because the market is moving so fast, buyers must plan visits as soon as possible when they find a home they’re interested in. Contacting the seller by phone or email to decide on a date and time also lets you check some information, notably whether or not the property is still for sale.
Showing up for the visit well prepared can make the difference: reread the listing, wander around the neighbourhood to see all its characteristics, have what you need to take notes, and decide beforehand what questions to ask the owner.
To make a sound decision, it’s also important to stay level-headed during the visit and to focus on the essentials: condition of the home and asking price. Take a look at the documents that the seller will most likely have on hand (declaration of the seller, tax and electricity bills, condo fees where applicable, the pre-purchase inspection report, etc.) to get as complete a picture as possible of the property and the costs involved in buying it.
Some small actions can have a big impact on how things go later, like being friendly to the homeowner and establishing trust. Remember that this is the person who will choose a buyer among all the interested visitors.
Once you find a home that meets your needs, it’s time to submit an offer to purchase to the seller. But note that this is a legal contract, meaning that it is very difficult to back out of.
“Don’t hesitate to make an offer. Keep in mind that if it doesn’t work with the first or second one, it will work someday. Be patient and stay optimistic!” says Martin Desfossés, real estate coach with DuProprio.
Placing conditions on a purchase
The main conditions included in offers to purchase are financing, inspection and the sale of the buyer’s current property. If these conditions are included in the offer to purchase, the sale only becomes official once the conditions are filled.
If a property is being sold without legal warranty
If this is mentioned in the Offer to Purchase in paragraph 8, or sometimes in the Declaration of the Seller (section 12), this does not exempt the homeowner from declaring all of the building’s known defects. It does mean that the buyer cannot take action against the seller if a hidden defect if found after the sale.
In an overbidding context, the asking price and the conditions included in the offer to purchase are really decisive. They can be the difference between acceptance or refusal. In fact, a seller with several offers will often be tempted by the one with the largest amount and the fewest conditions.
Before choosing to remove clauses, the buyer should get information on the implications and the risks involved from a notary in private practice. The notary can review the offer and give legal advice.
If the property is being sold with the help of DuProprio, the seller has access to advice from our notaries2 and can have the offer reviewed by them to check that all the information is valid.
Negotiating the offer
The seller has responded with a counteroffer and so the negotiation process begins. There are several points that are likely to be addressed, including the possession date and the conditions included in the offer.
If the buyer has decided to do business with a broker, the payment of their commission may also be a point to negotiate.
Withdrawing an offer to purchase
It can happen, for whatever reason, that the buyer wants to withdraw their promise to purchase. This is difficult but not impossible. It can be done under certain conditions, for instance if the inspection report reveals major problems or if the offer included an escape or cancellation clause.
Once the final offer is accepted, it’s time to get a loan from a bank, credit union or mortgage broker. The mortgage loan is the amount the financial institution agrees to lend the buyer to purchase a house. Before granting the loan, the buyer’s financial record, solvency and capacity to pay, and the value of the property will be verified. We recommend that you shop around for a loan to get the best interest rate and most beneficial terms.
Did you know?
A mortgage is secured by the property itself, meaning that the lender could seize it in the event of non-repayment, according to the terms of the loan.
The last step in buying a property involves seeing a notary, who is selected by the buyer, to finalize the real estate transaction. During the meeting, the notary will pay the seller, register the sale in the buyer’s name in the land register and give both parties a copy of the final deed of sale. The buyer must pay some of the notary's fees and costs.
While at the notary’s office, the buyer will also receive the keys to the house. The only things left will be to plan the move and then make the house a home.
Do you need to sell before you can buy? You can trust DuProprio’s services. Find out more about the visibility and support we offer by contacting us at 1-866-387-7677 or watching our short webinar.