What are the different steps in a residential real estate transaction?
Are you looking to purchase a residential real estate property and want to read more about the process?
Perhaps you need the services of a real estate lawyer to help you with your residential real estate transaction.
No matter the reason, this article is right for you.
In this article, we will quickly look at the different steps in a real estate transaction for the purchase of a residential property. We look at the bank financing, making an offer on the property, doing a visit and inspection and going to the notary to conclude the transaction. We also look at how a real estate lawyer may be helpful to support you with your real estate deal.
This article is divided as follows:
- Bank financing approval
- Finding a real estate property
- Make an offer to purchase on a real estate property
- Performing the obligations outlined in the offer acceptance
- Doing an inspection of the property
- Signing a purchase agreement at the notary
- Value of a real estate lawyer
Let’s get started…
1- Bank financing approval
The best practice before actively looking to buy a residential real estate property is to get a pre-approval of credit or mortgage at the bank.
This is a good practice as you will know exactly how much your financial institution will commit to finance you in your home purchase project.
Having a pre-approval in your possession will lead you to look for a real estate property within your means and ensure you buy what your credit allows you.
2- Finding a real estate property
The next step in a real estate transaction is finding the real estate property that you intend to buy.
There are a few ways you can do this.
One way is to work with a real estate broker who will provide you with property listings that fit your requirements.
Another possibility is for you to look for a property yourself by directly contacting the sellers.
There are several companies offering property owners the ability to list their property online and sell it themselves.
So go ahead and find the property of your dreams!
3- Make an offer to purchase on a real estate property
Once you have found the property you are interested in, you will need to start the formal process of putting an offer on the property.
You will prepare an offer either yourself or with the help of your broker where you outline the price and conditions based on which you wish to purchase the property.
Typically, a promise to purchase will contain the following points:
- Purchase price
- Condition to visit the property
- Condition to inspect the property
- Condition to obtain financing from the bank
- Closing date
- Occupation date
There may be more terms and conditions in your purchase offer depending on the specific nature of the deal.
A real estate lawyer can help you if you are not sure about what conditions to include.
Once the offer is submitted to the seller, the seller may reject it and make a counter-offer with terms and conditions proposed by the seller.
Ultimately, if you and the seller reach an agreement, you will both sign the offer acceptance.
The signing of the offer acceptance will lock the seller and the buyer to legally conclude the real estate transaction if the conditions included are satisfied within the defined timeline.
4- Performing the obligations outlined in the offer acceptance
With the offer acceptance signed by you and the seller, the contractual obligations for both start.
If you have conditions to inspect the property, get financing or visit the property, then you must do exactly that.
If you visit the property and are satisfied with the visit, then this condition is satisfied.
If you are not satisfied with the visit, if your purchase offer visit clause states that you can choose to no longer pursue the purchase if you are not satisfied at your sole discretion, then you can walk away from the deal by notifying the seller in writing.
The same is true for any other conditions such as your inspector’s visit or bank financing.
With regards to the bank financing condition, it’s important to put a bank financing condition in your offer to purchase even if you have a pre-approval as the bank will need to give you final confirmation of your financing approval.
You don’t want any surprises in case the bank gives you less credit than expected or refuses you due to some changes in circumstances or incorrect information they had about you.
5- Doing an inspection of the property
Most buyers will want to have the property inspected before they purchase it, especially if the property was built many years ago.
The inspection will give you comfort that someone with the right expertise had a look at the property and was able to ascertain that the property was in a good condition or not.
If the inspector identifies issues with the property, you can assess the impact of those issues and see if it’s worth re-negotiating the price or perhaps to walk away from the deal.
If your promise to purchase gives you the right to walk away from the deal on the basis of you not being satisfied with the inspection, then you can do that.
If your offer does not state that you can walk away from the deal, then you must make sure that you exercise your rights according to the terms of the inspection clause you signed.
If the inspection is to your satisfaction, this condition will get lifted as well.
It may happen that the inspector does not provide you with a proper inspection of the property and you discover defects after you move in.
In that case, a real estate lawyer can surely provide you legal advice to assist you.
6- Signing a purchase agreement at the notary
Once all conditions of the offer acceptance document are satisfied, the next is to go to the notary to conclude the purchase of the real estate transaction.
For this to happen, you will need to find a notary and mandate this person to handle the real estate transaction.
You will share with the notary all your documents such as the offer acceptance, your bank pre-approval of credit and the confirmation of financing along with any other information concerning your real estate transaction.
The notary will act as the middle person coordinating the purchase and sale of the property while at the same time protecting the banks in the middle.
The notary will verify if the seller has any outstanding mortgage.
If the seller has an outstanding mortgage balance, the notary will ensure to deduct the right amount from the proceeds of sale to pay off the seller’s outstanding mortgage.
The notary will also ensure the buyer’s bank delivers the necessary funds to purchase the property and will ensure that the money is paid to the seller once the transaction is completed.
The notary is required by law to ensure that the transaction is performed in a way that you fully understand its terms and conditions, reads the content to you and ensures you give your full consent.
In some cases, notaries may miss a step or fail to perform all the required steps to successfully close the real estate transaction.
A real estate lawyer will provide you all the required legal advice with respect to how the sale should have been conducted.
7- Value of a real estate lawyer
We’ve presented to you the steps of a generic and simple residential real estate transaction.
However, in any real estate transaction, things may get more complicated and the services of a real estate lawyer may be necessary.
For instance, if you have an accepted offer to sell your property but the buyer does not do what’s required to purchase the property, what do you do?
What if the seller does not show up to the notary to sign the transfer of title to the buyer?
Perhaps you are buying the property yourself and the paperwork is overwhelming for you.
These are all good reasons to consult with a real estate lawyer to ensure you are doing the right thing and that your rights are protected.
A real estate lawyer is specialized in real estate laws and understands the legal dynamic of a real estate transaction and the obligations of all parties involved.
Our real estate lawyers in Montreal have the experience to support you with respect to your real estate transaction.
Our Montreal law firm proudly offers services to the entire Montreal region and the Greater Montreal Area.
Contact us and it will be a pleasure for us to assist you!