Buying a Home in Bermuda
The Buying Process | The Benefits of Home Ownership | Purchase Cost Calculator
The Buying Process
So you have made the decision to buy a home. The following are the steps in the home buying process:
1. Figure out what you want.
Sit down with all the decision makers and decide what is important to you so you have a clear idea of what you are looking for. Remember the market in Bermuda is limited, so keep an open mind and don't restrict yourself with too many criteria.
2. Get pre-approved.
You have some idea of what you are looking for, now you need to know how much you can spend. In the highly competitive Bermuda market, this is a must. Today most vendors won't even consider an offer from someone who has not received pre-approval. This is also a good exercise to see if your expectations for your new home fit within your price range. It is also a good idea to discuss your financing with several lending institutions. You may find one willing to lend you more than the others.
3. Call Kathy Lines.
You know what you want and have been pre-approved. Now you need to sit down with your real estate agent to help make your dream a reality. Kathy has in depth knowledge of the current market conditions and what is available for sale. She can also give advice on whether your level of financing can support your expectations. The buying process can get complicated and very frustrating and Kathy can help you through all of this.
Also, if you see a property advertised by a competing agency, don't be afraid to contact Kathy. She can follow up and get all the details and show you the property under a co-brokerage agreement.
4. Look for your new home.
This can be the most frustrating process. It can take several weeks, months or even more than a year. The key is to remain patient and keep an open mind. Tell your agent that you would consider something a little smaller if it has potential to add on, or a little larger if it has an income apartment. This gives you more options and can shorten the time it takes to find your home. With the limited land resource in Bermuda , you may not find exactly what you are looking for, but with the help of your agent, you should be able to find something that satisfies your short and long-term goals. When looking at homes, be sure to tell Kathy what your like or don't like. This will help her with her search.
5. Choose a home.
You find a house that meets your needs and you are interested in buying. Every home has an asking price established by the seller. At this point, you have three options:
- Make an offer and it is accepted. Go to contact.
- Make an offer and get a counter offer from the seller. Decide whether to re-submit an offer.
- Make an offer which is rejected.
This is where the pre-approval is so important. At this point, you know how much you can afford to spend. The negotiating process can take a bit of time and can be frustrating. Your agent should guide you through. Some important points to remember when negotiating are whether you want to make an offer subject to such things as:
- Financing (pre-approval does not guarantee the bank will finance the purchase- it will be subject to an appraisal)
- Structural Survey
- Boundary Survey/ Staking
- The Sale of a Property
- Specific Closing Date
- License ( if you are non-Bermudian)
- Or any other condition you may deem necessary
Remember, the more conditions, the less desirable an offer becomes, however, you always want to make sure that you are protected. This would be a good time to engage the services of a lawyer.
6. Go to contract.
As the purchaser, you have the choice of which lawyer will convey the title of the property from the current owner to you. This lawyer will also help negotiate the contract and give you any necessary advice. The contract, which is normally a standard Bermuda Bar Association Agreement, will list details of the seller and purchaser as well as general conditions and special conditions i.e. subject to financing, structural survey, boundary staking, etc. Any advice a lawyer gives to you in structuring this agreement is at your expense. However, the cost associated with the transfer of title (legal fees and stamp duty) are normally split between the seller and purchaser. This can also be a point for negotiation. Discuss this with your agent. Once there is an agreement on all the terms of the contract, then it is executed by all parties involved. The purchaser signs first and places a deposit (normally 10%) to secure the property. Then the seller signs and finally, the agent. It is at this point that the purchaser and seller must, in good faith and in a timely manner, attempt to satisfy all conditions that relate to him/her. If a condition can not be met by either party and is not renegotiated, then the agreement will be considered null and void and the purchaser will receive his/her deposit back.
7. Completing the sale.
If all conditions have been met on the sales agreement, then it becomes fully enforceable on either party. The deposit placed by the purchaser is non-refundable and is paid to the seller in the event of purchaser default. This occurs very rarely and the normal closing period is 30 days from the satisfaction of all conditions as set out in the Sales Agreement. Why 30 days? Well, once all conditions have been met, your lawyer will notify the Department of Planning of the sale. They, in turn, require up to 28 days to inspect the property for any illegal development. After this time, the property is deemed to be free from any development that contravenes the Planning Act. This is an important step and should not be missed. If you take possession before the Department of Planning has inspected the property, then you become liable for any illegal development which may have occurred prior to your ownership.
The closing period can take longer for various reasons, but it is normally negotiated into the contract. It is important to notify your lending institution of the closing date. At this point, you may also consider insuring your property which your agent can help you with.
Typically, the day of closing or the previous day, the purchaser will sign the conveyance documents then the seller will follow. All funds are placed with the purchaser's lawyer including the deposit, less any commissions. The purchaser's lawyer will then disburse the funds, including paying any mortgages or liens on the property. The lawyer then gives the balance to the seller, keys are exchanged and the deal is closed.
The Benefits of Home Ownership
With every rent check that you write, you build equity in your landlord's property. This money could be going towards building equity in your own home. There are many advantages to owning a home including:
Security
Security is a feeling that comes with owning a home. You are no longer at the mercy of a landlord who can increase the rent or even evict you at any time. There is also security against inflation. As prices increase, so does the value of your home. As rents increase, you have the security in knowing that your mortgage payments will remain the same.
Investment
As you make mortgage payments, you increase your equity in your home. As your principle reduces, your equity increases. As you make improvements to your home, you will also add value.
As equity markets have shifted wildly in value, Bermuda real estate has increased significantly making it one of the best investments you can make.
Cash Equity
Over time, home ownership is better than a savings account. As time goes on, in addition to reducing your mortgage, the value of your property goes up, increasing your equity. This helps establish financial credibility and gives you an asset from which you can borrow additional funds to do things such as improve your home, buy a boat, or even acquire another home.
Satisfaction & Stability
These are the feelings you have living in a neighborhood where your children grow up and may have friends. You can make changes to your home as you see fit. Home ownership also offers the advantages that make life more enjoyable such as back yard barbeques, large family gatherings during holidays, the addition of a home workshop or a pool for the kids.
Stamp duty and conveyancing fees - Purchase Cost Calculator
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