Financial transactions between two parties can be complex, especially in the real estate world. Since buying or selling a property involves legally binding contracts, it’s always best to have a professional who will advocate for your best interests. This is why it’s crucial to work with a real estate lawyer when engaging in any type of real estate transaction.
Parties Involved in a Real Estate Transaction
During most residential (and often commercial) real estate transactions, six primary parties are involved.
- Real Estate Agent: For traditional home sales, real estate agents are hired to liaise between all parties involved and perform administrative tasks.
- Seller: Sellers hire a real estate agency to list and sell their home. The seller is usually involved only in negotiations with the buyer through their realtor.
- Buyer: As the potential new owner of a property, the buyer forms a contract with a real estate agent who assists them in finding the perfect home for their needs.
- Mortgage Lender: As a financial creditor, a mortgage lender may offer a pre-approval on a loan to assist a buyer in purchasing a home with qualifying terms.
- Home Inspector: A professional home inspector provides a detailed and thorough physical inspection of the property to ensure all standard building codes are met.
- Real Estate Lawyer: A real estate lawyer in Toronto has the experience, knowledge, and expertise to draft and review all legal documents about the sale of the property.
What Are the Common Types of Real Estate Transactions?
Below we list some of the most common types of real estate transactions in Toronto.
Purchases and Sales
A purchase and sale agreement involves a seller asking for a specific amount for their property, which is usually based on the market value. An Agreement of Purchase and Sale is a legally binding contract that outlines the details of the transaction. Within a purchase and sale, there are two main types of transactions:
- Traditional Sales: During a traditional real estate sale, a homeowner (or would-be homeowner) hires a real estate agent to either sell their property or assist them during the purchase of a residential property. Using their marketing skills, the real estate agent will help sell the property through strategic public relations and negotiate a good price for a buyer. Various types of residential properties can be bought or sold in a traditional sale, such as detached homes, semi-detached homes, townhouses, and condominiums.
- Foreclosures and Short Sales: A property that has been foreclosed by a financial lender for an unpaid mortgage or loan can be sold to a buyer at a lower price than valued by the lender. A lower sale price that is owed against the lender can also be seen in short sales.
- As-Is Sales: As the name suggests, a home is sold in the condition it is currently in when put on the market, also known as “as-is”. No repairs or cleanups are done to the structure or the property before the sale is complete. This is a legally binding real estate transaction between the buyer and the seller with cash as the proceeds.
- Sale-Leaseback Transactions: Sale-leaseback (SLB) transactions are not a commonly used tool but can benefit the property owner and the potential buyer. The current homeowner sells the home to a buyer with an agreement to lease back the property without the need to move. This type of real estate transaction gives the original owner the proceeds of the sale to become the tenant and rent back the home from the buyer.
Rental Transactions
A person may decide to rent or lease a home for a set period to avoid the costs associated with being a homeowner or to have temporary housing. There are three types of rental transactions.
- Long-Term Leases: As a legally binding contract, a long-term lease involves the renter paying an agreed-upon payment over a period ranging from several months to one year. With a residential contract, the renter is locked into scheduled payment amounts until the end of the lease. While it guarantees the owner a consistent cash flow, the set amount cannot be changed during the lease period to offset the fluctuating rental market prices.
- Short-Term Rentals: A short-term rental involves using a home, apartment, condo, or other residential unit for less than 30 days. Commonly known as Airbnb, transient rentals, vacation rentals, or resort dwellings, these real estate transactions work as regular rentals wherein a legal contract is agreed upon and signed.
- Rent-to-Own Agreements: For buyers who may not be able to obtain a mortgage or other financial lending, a rent-to-own purchase agreement allows the renter to acquire the property at the end of a specific timeline. This rental agreement clause stipulates a portion, or the full amount, of the monthly rental payments, is a retainer or deposit towards an agreed purchase price at the end of a term.
Pre-Construction Purchases
Toronto real estate lawyers are experienced in the pre-construction purchase transactions of both houses and condos.
- Condominiums: A common practice among developers is selling pre-constructed condos, usually before the condominium building construction begins. This type of pre-construction purchase involves the unit being sold up to five years in advance of completion at the current market price at the time of purchase. Essentially, a buyer is purchasing the plan for the condo with the “right to buy” once construction is completed.
- Houses: A pre-construction house offers buyers a lower initial payment with a higher price tag over time. Payments are scheduled allowing for an extended time to raise the needed capital for the purchase. As the pre-construction purchase contract is set at the current market price, any increase during the construction time gives the buyer a profit.
Contact Zinati Kay for a Residential Real Estate Lawyer in Toronto
Before you invest, buy, or sell property, speak to the experts at Zinati Kay – Real Estate Lawyers. As the leading residential real estate law firm in Toronto, we back our success with more than 25,000 real estate deals with no title claims.
Our 25-year span in the local real estate business is built on providing excellent and concise service to all clients with our fixed closing costs. Contact us at (416) 321-8766 or use our online form to request a quote today!