Real Estate Talk: Be prepared
when selling or buying

An up-to-date certificate of location and mortgage pre-approval smoothes the way

By Joseph Marovitch

May 3, 2023

This past week, a client who is selling brought up an issue that has been raised several times over the years. The issue is whether they should order a new certificate of location at the beginning or end of a marketing campaign. Another client, who is purchasing, asked me why I suggest they acquire a pre-approval from their financial institution before purchasing.

I will address the certificate of location first. It is required when selling a property that a current certificate of location be provided to the purchaser. The certificate of location indicates the parameters of the property, the cadastre numbers and any rights or servitudes the property may have, either in favour of the owner or the neighbours. The certificate also indicates if there are any infringements upon the property or the neighbours next to or near the property.

If changes have occurred since the seller took possession, the seller is required to provide a new certificate of location at his own expense.

If there are no changes to any aspect of the property as indicated in the certificate of location since the owner purchased it then a new certificate is not necessarily required. If changes have occurred since the seller took possession, such as cadastre numbers, additions, or subtractions from the physical structure, changes or added rights or servitudes, then the seller is required to provide a new certificate at the seller’s expense.

If there are no changes since possession within the last 10 years of ownership but the buyer’s financial lender is insisting on a new certificate due to the age of the certificate, it is stated in the promise to purchase in clause 10.3 that the acquisition of a new certificate is at the buyer’s expense.

As to the question of whether a required new certificate should be purchased before or after the marketing and selling of the property, it is wise to acquire the certificate at the beginning of the campaign. The reason for this is a certificate can take up to three weeks or more to get.

If the seller waits till an offer is accepted and hopes to be at the notary within 30 days of the accepted offer, the seller may find there will be a delay in signing at the notary. Sometimes buyers pay a premium to have possession sooner and this may not be possible if a new certificate is required at the last minute.

As well, a new certificate may indicate an issue such as an infringement like an illegal view onto the neighbour’s bedroom or vice versa. This can cause further delays to the signing at the notary.

‘Even if the non-preapproved buyer has a higher offer than the approved buyer, the seller may choose the lower offer since the risk of not going to the notary is reduced.’

The client who inquired about why acquire a pre-approval before shopping for a residence was in the process of searching for a property with me. A pre-approval is a document from the buyer’s financial institution indicating how much money the financial institution is prepared to lend the buyer and at what fixed interest rate for a fixed period.

A pre-approval with only one condition of sending an evaluator to the proposed property to purchase to ensure it is worth what the buyer is paying indicates to the seller that the buyer is more than halfway approved for their financing.

Buyers tend to accept offers from pre-approved buyers quicker than from buyers without pre-approved financing. Even if the non-preapproved buyer has a higher offer than the approved buyer, the seller may choose the lower offer since the risk of not going to the notary is reduced.

Another benefit of acquiring a pre-approval is the interest rate can be secured by the buyer for up to three months. If interest rates increase in the three months, the buyer maintains the lower interest rate in the pre-approval. If rates decrease within three months, the preapproved buyer gets the lower rate.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Fear of inspection

State Of The Market

According to the Canadian Mortgage and Housing Corporation (CMHC), home prices will continue to decline until mid-2023, even though demand for homes is higher than supply. This is due to higher carrying costs. It is expected that interest rates may decrease in 2024, depending on the inflation rate. As inflation decreases, interest rates should as well. If inflation rises, so will rates.

‘… home prices will continue to decline until mid-2023, even though demand for homes is higher than supply. This is due to higher carrying costs.’

As the rates and inflation decrease, we should see more homes for sale and carrying costs for buyers reduce. However, with growing demand among low inventory prices of homes may rise when those rates decrease.

Once again, buyers are at a crossroads – buy now at a lower price with higher carrying costs or buy later with lower carrying costs but a higher price.

Have a great week!

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