Choosing to buy a home is one of the biggest decisions you’ll make in your life. It’s a complex ordeal that requires a lot of planning, and the help of a knowledgeable REALTOR® makes the process run smoothly. To ready you for this, here is a general overview of what to expect and prepare.
In the province of British Columbia, a REALTOR® owes fiduciary duties to clients whom they represent through agency relationships. This is the same relationship a lawyer has with their client.
These duties include:
- Undivided loyalty
- Obeying all lawful instructions of the principal (client)
- Exercising reasonable care and skill in performing all assigned duties
- Accounting for all money and property placed in a Company’s care while acting for the principal
- Disclosure – the duty to tell you any and all relevant facts
- Confidentiality – the duty to keep matters of a confidential nature just that, confidential.
We only work with Buyers who are willing to work exclusively with us. However, we don’t tie people down with an exclusive Buyer’s agency contract. We take people at their word. If someone says they want to work with us and we shake on it then that’s good enough for us.
By the way, an important point to remember: when you’re working with a Realtor as a Buyer you are NOT required to pay us any money out of your own pocket. That’s right, it’s free for you: So why wouldn’t you want to have your own agent?
To arrange showings for properties please contact us. Do not contact the listing agents directly. Even if you find the properties on websites such as REW.ca or realtor.ca (which we encourage you to look at) please contact us to arrange the showing. There is nothing more annoying to an agent than being contact directly by someone else’s clients. The one exception to this rule is open houses – if you see an open house we highly encourage you to have a look even if we are not with you, or if for some reason we cannot make it with you to open houses on a given day. The purpose of an open house is to sell the house and allow as many people to see it as possible.
Whenever possible we will try to arrange for showings of several properties on the same day to help save you time and give you a point of comparison against other properties.
Making an Offer
Typical Subject Clauses
1) Subject to being approved for mortgage financing
2) Subject to satisfactory inspection
3) Subject to receiving and approving the title search
4) Subject to approving the Property Disclosure Statement
5) Subject to arranging fire and property insurance
6) Review of Strata Documents
Subject clauses have a set date upon which they are removed from a contract, at which point the contract becomes firm and binding upon all parties. Following removal of subjects a deposit is put down on the property. This deposit forms a portion of your down payment (but not the entirety of it). This is placed In Trust with our brokerage. Generally deposits range from 2% of the purchase price and up.
As well there will be a number of “warranties” placed in the terms of the contract. These are clauses which are not removed and include terms such as that the appliances will be in proper working order and that the home will be cleaned prior to moving in.
The Importance of Pre-Approval
It is of paramount importance that you meet with a mortgage broker or your financial institution before you begin your search for a home. There are many reasons for this, but the key among them for you as a buyer are:
- It allows you to know how much you can spend and locks in an interest rate for you so that you can more easily calculate what your cost of borrowing will be
- It allows you to move faster with subject removal, which is paramount in today’s fast moving market
- You won’t waste your time looking at properties you can’t afford
We have many lenders and mortgage brokers that we work closely with. We are always happy to refer you to someone that we know and trust.
These days pre-approvals are more important than ever thanks for the Mortgage Stress Test Rules. Under the Stress Test you are required to qualify for a mortgage at 2% above what your actual mortgage rate will be. So, if your actual mortgage rate will be 3.5%, you will have to qualify for a mortgage at 5.5%, effectively reducing your buying power by 20%. (please note that you will not be paying 5.5% on your mortgage, that is just the rate they would use to qualify you). Please let us know if you have any questions in this regard.
Completion, Possession and Adjustment Dates
- The completion date is the day on which the Title to the property changes hands (i.e. you become the owner)
- The Possession date is date on which you gain possession of the property and can move in. The Possession Date is often the following day, or two to four days after the completion date.
- Adjustment date is generally the same date as the possession date. This is the date on which things such as property taxes, government levies, strata fees and the like are adjusted from.
What is a deposit in a real estate transaction?
- A deposit is a sum of money put down by the purchaser to secure the property, and as a sign of good faith of the Buyers intention to follow through with the purchase of the property.
- A deposit is generally around 5% of the purchase price of the property, but can be lower or higher in different circumstances
- The deposit is generally not paid until subjects have been removed. The deposit is generally paid into trust and held by our brokerage until completion, at which time it is transferred to the lawyers.
- The deposit forms a portion of your down payment for the property.
The down-payment on a property is the actual amount of cash money that you are putting towards the purchase of your new home.
These are the current minimum down payment requirements:
- 5% of the purchase price under $500,000
- 10% of the purchase price between $500,001 – $999,999
- 20% of the purchase price over $1,000,000
A purchase in which you are putting less than 20% down will require mortgage insurance.
An insured mortgage can, currently, only have a maximum amortization period of 25 years.
An traditional mortgage can have an amortization period of up to 30 years.
Once an offer has been accepted we encourage you to begin looking for a lawyer to handle the transfer of title of the property into your name on the Completion Date. This needs to be taken care of ahead of time to ensure that the file can be sent to them and documents can be prepared. We have a number of lawyer’s we work with and would be happy to provide you with the names of a few of them.
Why a lawyer over a notary public?
While notary publics can be great for many things, our opinion is that there are too many nuances and, frankly, many things that can go wrong with a real estate transaction and which cannot be addressed by a notary. A notary cannot give you legal advice and they are not able to do an undertaking in the event of an issue with the transaction.
DO NOT make any major purchases. Between the time you have an accepted offer and the time you complete on your transaction it is imperative that you not make any major purchases. Making a major purchase can affect your cash position or your credit position if you put it on credit. Even taking out a car loan can have a large effect on your purchase. DO NOT, we repeat, DO NOT, make any major purchases until AFTER your purchase has completed.
Property Transfer Tax (PTT) is applicable on the purchase of all properties in BC, with a few exceptions. Property transfer tax is 1% of the first $200,000 and 2% for the portion between $200,000 and $2,000,000 and 3% on any portion over $2,000,000.
If you are a first-time home buyer you are exempt from PTT on the purchase of a home under $500,000. For purchases between $500,000 and $525,000 a partial exemption does apply. If you are purchasing a home for the first time in conjunction with someone who has owned property before you will be entitled to an exemption for the PTT on the portion of the home you own (i.e. if you are both 50% owners only 50% of the PTT will be payable as your portion is exempt).
The government of BC also launched a program for an exemption to the PTT on newly built homes. This exemption is applicable on homes with a value of under $750,000 (with a partial exemption available between $750 – $800). This exemption is available to everyone, not just first-time home buyers.
Certain purchases of real estate in BC require the payment of GST to the government. Generally speaking, GST is only applicable on the purchase of a newly built home, or on a substantially renovated (95% or more renovation) home. Although GST is 5% of the purchase price where applicable, a portion of this is generally rebated by the government. We recommend obtaining independent tax advice should you have any questions in this regard.
Strata fees are a set amount of money you pay to the strata corporation on a monthly basis for the upkeep, maintenance and services within a building. A portion of the strata fee also goes into a contingency reserve fund that helps to cover unforeseen events or large projects. Every strata differs on what these monthly fees cover. Generally speaking, more services are covered in a condo than in a townhouse, which generally leads to lower monthly strata fees in a townhouse. As an example, you might find that in a condo the $350 strata fees covers management, landscaping, natural gas, garbage pick-up and caretaker. Make sure to carefully read over the strata documents and see what is included in your strata fees.
Special Levies / Assessments
A special levy or assessment is when money is collected by the strata from the individual owners for a specific, joint, common purpose. For example, when the roof needs replacing and there is not enough money in the continency fund to cover this cost a special levy may be raised in order to make the replacement. Special levies must be voted on and approved by the strata at either an Annual General, or Special General meeting. These expenses can arise at any time, and are often unexpected, but you can do your due diligence by reading all of the strata documents and getting a good idea of the current state of the building and whether there is anything likely to come up in the near future.