Buying a Home

This script covers buying a house. If you’re buying a condominium or townhouse, also check script 407, called “Buying a Condominium.”

Should you have a lawyer?

A house is probably the most expensive thing you’ll ever buy. And buying a house is complicated. The potential for disaster is great – one mistake could cost a lot. As well, there are risks in real estate, and when buying or selling, you should be careful. For example, people can:

1. use a false identity to pretend they are the true owner of a property and sign documents fraudulently.
2. flip the same property through back-to-back transactions to falsely inflate the asking price of the property.

These are just two examples of many possible types of real estate fraud. To protect yourself, you should use a lawyer, instead of trying to do it yourself.

Be careful – there are many other costs besides the purchase price

There are many extra costs when you buy a house. One is the property purchase tax (or PPT), though you may not have to pay this tax if this is your first home. For more information, call the Property Transfer Tax office of the BC government in Victoria, at 250.387.0604. Outside Victoria, call Enquiry BC at 604.660.2421 in Vancouver and 1.800.663.7867 elsewhere in BC and ask for the Property Transfer Tax office. Or check the website, at [www.gov.bc.ca/sbr www.gov.bc.ca/sbr]. Click on “Individuals”, then on “Property Taxes” and finally on “Property Transfer Tax”.

Another cost is the 12% Harmonized Sales Tax (or HST). It applies to the legal fees and some of the other costs you pay. It also applies to the whole purchase price if you’re buying a new house or one that’s been substantially renovated. You may be able to get an HST rebate if you’re buying a new home. There are also registration fees in the Land Title Office, and usually legal fees to prepare and register the conveyance (the transfer of title) and the mortgage.

So you may have to pay several thousand dollars more than the purchase price. Before you make an offer to buy a house, decide if you can afford both the purchase price plus all the other costs.

Do you need a realtor? Who pays the realtor?

You may decide to look for a house yourself or you may use a professional to help you. If you decide to use an agent, pick one that you trust and who you’re comfortable with. The seller pays both real estate agents, the one for the seller and the one for the buyer. If there’s no sale, there’s usually no commission paid to the agent. If you don’t use an agent, good places to start looking for houses are local newspapers and the multiple listing website at www.mls.ca.

You have to make a written offer

If you find a house you want to buy, you have to make a written offer to buy it. Oral agreements for land may not be valid. The realtor provides the form, usually from the local real estate board. It’s called a contract of purchase and sale. Read it carefully, because this contract is legally binding. If there’s anything in it that you don’t like or doesn’t apply, cross it out. Then initial the change and get the seller to initial the change too.

What should you include in the offer?

1. Give the seller a time limit to accept your offer – normally a day or so. If the seller doesn’t accept it by then, your offer expires.
2. If there are things in the house you want the seller to include in the price – such as appliances, curtains, mirrors or chandeliers – add a sentence that the purchase price includes these items and make sure each item is listed.
3. You might want to make your offer conditional on the house passing an inspection by a professional building inspector. Use a “subject to” clause to do this – a real estate agent or a lawyer can help you with the wording. While the seller usually gives you a “Disclosure Statement” listing any potential problems the seller knows about, you might still want your own inspector.
4. If you have to sell your own home before you can buy the new one, make your offer conditional on selling your current house by a date that you set.
5. If you need a mortgage, make your offer “subject to” (or conditional on) getting satisfactory financing, even if the bank has already “pre-approved” a mortgage amount.
6. Include a statement saying the offer is “subject to” your lawyer’s approval, so your lawyer can check the offer before it becomes a binding contract.

How much should you pay as a deposit?

When you make an offer, you’ll have to make a deposit, which you’ll want to keep as low as possible. The normal deposit is 5% to 10% of the purchase price, which should be paid to the realtor in trust, not the seller.

What if the seller makes a counteroffer?

The seller may accept your offer, or may cross out some of your terms and add new ones. Once the seller changes your offer in any way, it becomes a counteroffer, or a new offer, by the seller. That cancels (or revokes) your original offer. Then you must decide if you want to accept the new offer or make another counteroffer of your own. You do not have to accept a new offer or a counteroffer.

What do you need to get a mortgage?

As soon as you and the seller have signed an offer or counter-offer, you should start to get a mortgage. Shop around to get the best terms, and promptly give the mortgage company any documents and information it needs. Usually, a mortgage company will need an appraisal of the house (that you have to pay for) before it promises to give you the mortgage. And it may need a survey certificate showing that the house is within the property boundaries, or “title insurance”, before the completion date (when the property transfers from the seller to you and you become the owner).

Once you’ve arranged your financing, ask the mortgage company to give you a written commitment letter promising to give you the mortgage. The lawyer doing the mortgage can often do your legal work for the purchase too.

What about title searches and insurance?

Your lawyer will do a title search. It shows the registered owner of the property and any charges, such as mortgages, liens, or easements, registered against it. Any existing mortgages and liens will have to be paid off by the seller before you buy the house.

Also, talk to your lawyer about when you should get fire and liability insurance on the house and how much you should get. The mortgage company will require proof of this insurance.

When do you remove the “subject-to” clauses?

When you’re satisfied with the results of the subject-to clauses or conditions – for example, the house inspection is fine and you’ve arranged a satisfactory mortgage – you should give written notice to the seller that you’re removing the conditions. Once you do this, the offer or counter-offer becomes a legally binding contract. If you can’t meet the conditions and don’t remove them, the contract ends and you don’t have to buy the house.

What is the “statement of adjustments”? Before the completion date, your lawyer will give you a document called the statement of adjustments. This document shows all money coming in and going out. It covers things that you and the seller share, like property tax. The most important figure for you is the amount you need by the completion date. This is the money you have to pay, in addition to your mortgage.

How do you finish the purchase?

Normally, your lawyer prepares the transfer documents and sends them to the seller’s lawyer. The seller signs the documents and the seller’s lawyer returns them to your lawyer. Then, when your lawyer has your cash and the promise of the mortgage money, your lawyer registers the transfer documents and the mortgage with the Land Title Office. When the Land Title Office confirms the registration, and the mortgage company has given your lawyer the mortgage money, your lawyer gives the money to the seller’s lawyer. The realtor usually gives you the keys to the house once the registration is finished.

More information

Read the booklet called “Buying a Home in BC Information Booklet” prepared by the Real Estate Council of British Columbia. For a free copy, call them in Vancouver at 604.683.9664 or toll-free 1.877.683.9664 elsewhere in BC. Or go to their website at www.recbc.ca and click on “Consumer Info” and then “Publications.” For more information on mortgages, check script Mortgages and Financing a House Purchase (Script 408)408, called “Mortgages and Financing a House Purchase”.

[updated February 2013]

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The testing of the claims in a court proceeding at a formal hearing before a judge with the jurisdiction to hear the proceeding. The parties present their evidence and arguments to the judge, who then makes a decision resolving the parties' claims against one another that is final and binding on the parties unless successfully appealed. See "action," "appeal," "argument," "claim," "evidence" and "jurisdiction."

In law, the re-examination of a term of an order or agreement, usually to determine whether the term remains fair and appropriate in light of the circumstances prevailing at the time of the review. In family law, particularly the review of an order or agreement provided for the payment of spousal support. See "de novo," "family law agreements," "order" and "spousal support."

A person licensed to practice law in a particular jurisdiction by that jurisdiction's law society. See "barrister and solicitor."

(1) In law, an unintentional act or failure to act arising from a misunderstanding of the true state of affairs, from ignorance, or from an error not made in bad faith. (2) In contract law, an unintentional misunderstanding as to the nature of a term agreed to in a contract that may justify setting aside all or part of the contract. See "bad faith" and "contract."

In law, all of the personal property and real property that a person owns or in which they have an interest, usually in connection with the prospect or event of the person's death.

Something which can be owned. See "chattels" and "real property."

In law, a calculation of the allowable legal expenses of a party to a court proceeding, as determined by the Supreme Court Family Rules. The party who is most successful in a court proceeding is usually awarded their "costs" of the proceeding. See "account," "bill of costs," "Certificate of Costs or Expenses" and "lawyer's fees."

In property law, the act of an owner of a thing giving ownership of that thing to another person, usually in exchange for money or other property in the case of a sale, or in exchange for other rights in the case of a family law agreement. See "family law agreements," "ownership" and "sale."

In law, a document demonstrating ownership of a thing. See "ownership."

The conditional transfer of the title to real property by an owner to another person in return for money given by that person as a loan, while retaining possession of the property. The party to whom title is given, the "mortgagee," usually a bank, is allowed to register the title of the property in their name if the person taking the loan, the "mortgagor," fails to make the required payments. See "encumbrance" and "real property."

In law, someone acting on behalf of someone else, with that person's express permission and normally at their express direction.

In law, a form of possession of property in which a "trustee" keeps and manages property for the benefit of another person, the "beneficiary," without owning that property and usually without acquiring an interest in that property other than as payment for their services. The trustee holds the property in trust for the beneficiary. See "constructive trust," "ownership," "possession" and "resulting trust."

An agreement to transfer the ownership of property from one person to another in exchange for the reciprocal transfer of something else, usually money. See "agreement."

In contract law, the expression, either orally or in writing, of a willingness to be bound by a proposed agreement, contract, or settlement. See "offer to settle."

Real property; a parcel of real property and the buildings upon it. See also "chattel," "ownership" and "possession."

(1) In law, a requirement or obligation to honour and abide by something, such as a contract or order of the court. A judge's order is "binding" in the sense that it must be obeyed or a certain punishment will be imposed. (2) The principle that a higher court's decision on a point of law must be followed by a lower court. See "contempt of court" and "precedent."

An agreement between two or more people, giving them obligations towards each other that can be enforced in court. A valid contract must be offered by one person and accepted by the other, and some form of payment or other thing of value must generally be exchanged between the parties to the contract.

A phrase describing how property is held by one person for the benefit of another person who is ultimately entitled to the use or proceeds of sale of that property. Money held in trust is held in a lawyer's bank account on behalf of a client, on the lawyer’s promise not to use that money except as may be agreed.

A professional estimate of the worth of something, such as a company, a property, an investment, a book of business, a loan, or a debt. In family law, this is sometimes required for the court to determine the value of property such as an art collection or a house.

(1) Information which establishes or tends to establish the truth of a fact, or (2) the conclusion of a logical argument. See "evidence" and "premises."