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Difference between revisions of "Buying a Home"
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{{REVIEWEDPLS | reviewer = [https://www.ganapathico.com/our-team/nathan-ganapathi/ Nathan Ganapathi] and [https://www.ganapathico.com/our-team/anna-kurt/ Anna Kurt], Ganapathi Law Group |date= October 2017}} {{Dial-A-Law TOC|expanded = home}} | {{REVIEWEDPLS | reviewer = [https://www.ganapathico.com/our-team/nathan-ganapathi/ Nathan Ganapathi] and [https://www.ganapathico.com/our-team/anna-kurt/ Anna Kurt], Ganapathi Law Group |date= October 2017}} {{Dial-A-Law TOC|expanded = home}} | ||
Buying a home is an exciting life event. Learn the key factors to consider before you make an offer, and the steps involved in buying a home in British Columbia. | |||
== | ==What you should know== | ||
===Using a real estate agent=== | ===Using a real estate agent=== | ||
You may decide to look for a home on your own or you may use a professional to help you. There are advantages to working with ''' | You may decide to look for a home on your own or you may use a professional to help you. There are advantages to working with a '''real estate agent'''. Agents can help you clarify the type of home you need and can afford. They are connected to networks of potential sellers and can help arrange appointments to view available properties. And they can help you navigate a complex process by: | ||
*explaining the forms used and helping you make a written offer to purchase | |||
*presenting your written offer to the seller | * explaining the forms used and helping you make a written offer to purchase | ||
*explaining the steps to complete the purchase after the seller accepts your offer | * presenting your written offer to the seller | ||
* explaining the steps to complete the purchase after the seller accepts your offer | |||
As well, keep in mind the seller typically pays both realtors (the seller’s realtor and the buyer’s realtor) from the sale proceeds after selling their home. | As well, keep in mind the seller typically pays both realtors (the seller’s realtor and the buyer’s realtor) from the sale proceeds after selling their home. | ||
===The money you will need=== | ===The money you will need=== | ||
Before you start looking for a new home, it’s important to consider how much you can afford to pay. This will allow you to spend your time looking at homes in your price range. | Before you start looking for a new home, it’s important to consider how much you can afford to pay. This will allow you to spend your time looking at homes in your price range. | ||
Almost everyone who buys a home borrows some of the money needed to pay for it. The cash you can apply towards buying a home is called the '''down payment'''. | Almost everyone who buys a home borrows some of the money needed to pay for it. The cash you can apply towards buying a home is called the '''down payment'''. | ||
Obtaining a loan to borrow the rest of the money typically involves signing a document called a '''mortgage'''. This document sets out the terms and conditions for the loan and its repayment. If you fail to meet your obligations under the mortgage, the lender may have the right to take your home to pay off what you still owe. | Obtaining a loan to borrow the rest of the money typically involves signing a document called a '''mortgage'''. This document sets out the terms and conditions for the loan and its repayment. If you fail to meet your obligations under the mortgage, the lender may have the right to take your home to pay off what you still owe. | ||
The easiest way to learn how much money you will be able to borrow as a mortgage loan is to meet with one or more financial institutions. These lenders will look at your family’s current income and debts and do a credit check to decide how much they will lend to you. | The easiest way to learn how much money you will be able to borrow as a mortgage loan is to meet with one or more financial institutions. These lenders will look at your family’s current income and debts and do a credit check to decide how much they will lend to you. | ||
For more, | For more, [[Mortgages and Financing a Home Purchase|see our information on mortgages and financing a home purchase]]. | ||
===The costs of buying a home (other than the purchase price)=== | ===The costs of buying a home (other than the purchase price)=== | ||
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====Property transfer tax==== | ====Property transfer tax==== | ||
When you purchase property in BC that is registered at the | When you purchase property in BC that is registered at the land title office, you're responsible for paying '''property transfer tax'''. You pay the tax based on the purchase price of the property. The tax rate is: | ||
* 1% on the first $200,000 of the price, | |||
* plus 2% on the rest of the price up to $2,000,000, | |||
* plus 3% on amounts over $2,000,000, | |||
* and, for a residential property, another 2% on amounts over $3,000,000 | |||
If you’re purchasing your first home, you may qualify to reduce or eliminate the amount of property transfer tax you pay. There are other exemptions as well. For details, | If you’re purchasing your first home, you may qualify to reduce or eliminate the amount of property transfer tax you pay. There are other exemptions as well. For details, [https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax see the BC government website]. | ||
====Other taxes==== | ====Other taxes==== | ||
Other taxes apply in certain circumstances. | Other taxes apply in certain circumstances. | ||
If you are a '''foreign national''', you must pay an '''additional property transfer tax''' of 20% if the property | If you are a '''foreign national''', you must pay an '''additional property transfer tax''' of 20% if the property [https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/additional-property-transfer-tax is within specified areas of BC]. These include Metro Vancouver, Greater Victoria, Fraser Valley, Central Okanagan, and Nanaimo. | ||
'''Goods and services tax''' (GST) of 5% applies to the purchase price of all newly-constructed or substantially renovated homes. GST also applies to most legal fees and other costs of buying a home. | '''Goods and services tax''' (GST) of 5% applies to the purchase price of all newly-constructed or substantially renovated homes. GST also applies to most legal fees and other costs of buying a home. | ||
'''Provincial sales tax''' (PST) of 7% applies to most legal fees and other costs of buying a home. | '''Provincial sales tax''' (PST) of 7% applies to most legal fees and other costs of buying a home. | ||
===Making an offer to purchase=== | ===Making an offer to purchase=== | ||
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Give the seller a '''time limit''' to accept your offer — normally a day or two. If the seller doesn’t accept it by then, your offer expires, allowing you to make an offer to someone else. | Give the seller a '''time limit''' to accept your offer — normally a day or two. If the seller doesn’t accept it by then, your offer expires, allowing you to make an offer to someone else. | ||
When someone sells a home, all the '''fixtures''' go along with it. Generally, a fixture is anything that’s attached to the home to the point where removing it would damage the home or require repair. The bathroom sink is an obvious example. The appliances — such as the washer, dryer, fridge and stove — '''are not''' fixtures. It’s best to specifically list in the offer anything that might be thought to be a fixture, that you want the seller to include in the sale — such as appliances, curtains, mirrors or chandeliers. Add a sentence that the purchase price includes these items and make sure each item is listed. | When someone sells a home, all the '''fixtures''' go along with it. Generally, a fixture is anything that’s attached to the home to the point where removing it would damage the home or require repair. The bathroom sink is an obvious example. The appliances — such as the washer, dryer, fridge and stove — '''are not''' fixtures. It’s best to specifically list in the offer anything that might be thought to be a fixture, that you want the seller to include in the sale — such as appliances, curtains, mirrors or chandeliers. Add a sentence that the purchase price includes these items and make sure each item is listed. | ||
You might want to make your offer conditional on the home passing an inspection by a professional building inspector. To do this, you can use a ''' | You might want to make your offer conditional on the home passing an inspection by a professional building inspector. To do this, you can use a '''subject to clause''', which spells out a condition that must be met before a sale proceeds. While the seller usually gives you a disclosure statement listing any potential problems the seller knows about, you might still want your own inspector to look at the home. | ||
You can also use a | You can also use a subject to clause if you must sell your own home before you can buy the new one. You can make your offer conditional on selling your current home by a date you set. | ||
If you need a mortgage, you can make your offer | If you need a mortgage, you can make your offer subject to getting satisfactory financing. This is wise even if the bank has already pre-approved a mortgage amount, just in case. | ||
You may consider a statement saying the offer is | You may consider a statement saying the offer is subject to your lawyer’s approval, so you can have a lawyer check the offer before it becomes a binding contract. | ||
====How much to pay as a deposit==== | ====How much to pay as a deposit==== | ||
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===Hiring a lawyer=== | ===Hiring a lawyer=== | ||
Buying a home is a major expense and a complicated process. As well, there are risks of very bad things happening when buying real estate, if you’re not experienced and watchful. For example, people can: | Buying a home is a major expense and a complicated process. As well, there are risks of very bad things happening when buying real estate, if you’re not experienced and watchful. For example, people can: | ||
*use a false identity to pretend they are the true owner of a property and sign documents fraudulently | |||
*sell the same property several times in back-to-back transactions to falsely inflate its asking price | * use a false identity to pretend they are the true owner of a property and sign documents fraudulently | ||
* sell the same property several times in back-to-back transactions to falsely inflate its asking price | |||
These are two examples of '''real estate fraud'''. To protect yourself, you should consider using a lawyer to advise you through the process of buying a home. | These are two examples of '''real estate fraud'''. To protect yourself, you should consider using a lawyer to advise you through the process of buying a home. | ||
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===Step 1. Decide if you are hiring a real estate agent=== | ===Step 1. Decide if you are hiring a real estate agent=== | ||
Decide if you are going to look for a home on your own or hire a real estate agent. | Decide if you are going to look for a home on your own or hire a real estate agent. | ||
If you decide to use a realtor, pick someone you trust and are comfortable with. | |||
If you decide to look for a home on your own, good places to start looking are local newspapers and the internet, where there are [ | If you decide to use a realtor, pick someone you trust and are comfortable with. | ||
If you decide to look for a home on your own, good places to start looking are local newspapers and the internet, where there are [https://www.rew.ca/ various listing websites]. | |||
{| class="wikitable" | {| class="wikitable" | ||
|align="left"|'''Tip''' | |align="left"|'''Tip''' | ||
[https://www.canlii.org/en/bc/laws/stat/sbc-2004-c-42/latest/sbc-2004-c-42.html Under the law in BC], real estate agents must be licensed. [https://www.recbc.ca/about/licensee-search.html You can use the licensee search from the Real Estate Council of BC] to see if an agent is currently licensed. | |||
|} | |} | ||
===Step 2. Make an offer=== | ===Step 2. Make an offer=== | ||
When you find a home you want to buy, make an '''offer to purchase'''. | When you find a home you want to buy, make an '''offer to purchase'''. A realtor can help you write up the offer on the local real estate board’s '''contract of purchase and sale form'''. Include any subject to clauses for conditions that are important to you, as discussed above. | ||
{| class="wikitable" | |||
|align="left"|'''Tip''' | |||
If you are making an offer on a condominium (also known as '''strata housing'''), [[Buying a Condominium|see our information on buying a condominium]]. | |||
|} | |||
===Step 3. Arrange for financing=== | ===Step 3. Arrange for financing=== | ||
Perhaps you got | Perhaps you got pre-approval for a mortgage before making an offer to purchase. If not, as soon as you and the seller have signed a contract for purchase and sale, you should begin the process to get a mortgage, if you need one. | ||
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 home before it promises to give you the mortgage. Often, this appraisal will be done at your own expense. | |||
As well, the mortgage company may require certain documents prior to the '''completion date''' (the date the property transfers from the seller to you and you become the owner). For example, the mortgage company may require: | |||
* '''Proof of insurance''', showing you’ve organized fire and liability insurance coverage for the home. | |||
*'''Proof of insurance''', showing you’ve organized fire and liability insurance coverage for the home. | * '''A survey certificate''', showing the home is within the property boundaries. | ||
*'''A survey certificate''', showing the home is within the property boundaries. | * '''Title insurance''', which is an insurance policy that protects you and them from problems related to the property’s title, such as unpaid liens, an encroachment that isn’t discovered until later, or fraud. | ||
*'''Title insurance''', which is an insurance policy that protects you and them from problems related to the property’s title, such as unpaid liens, an encroachment that isn’t discovered until later, or fraud. | |||
{| class="wikitable" | {| class="wikitable" | ||
|align="left"|'''Tip''' | |align="left"|'''Tip''' | ||
Once you’ve arranged your financing, ask the mortgage company to give you a written commitment letter promising to give you the mortgage. You’ll need this letter to complete the sale. | Once you’ve arranged your financing, ask the mortgage company to give you a written commitment letter promising to give you the mortgage. You’ll need this letter to complete the sale. | ||
|} | |} | ||
===Step 4. Remove any subject to clauses=== | ===Step 4. Remove any subject to clauses=== | ||
When you’re satisfied with the results of any subject to clauses or conditions (for example, the home inspection is fine), you should give written notice to the seller that you’re removing the conditions. Once you do this, the offer or counteroffer becomes a legally binding contract. There is no further cooling-off period to change your mind and cancel the contract. | When you’re satisfied with the results of any subject to clauses or conditions (for example, the home inspection is fine), you should give written notice to the seller that you’re removing the conditions. Once you do this, the offer or counteroffer becomes a legally binding contract. There is no further cooling-off period to change your mind and cancel the contract. | ||
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===Step 5. Prepare the transfer paperwork=== | ===Step 5. Prepare the transfer paperwork=== | ||
Most home buyers hire a '''lawyer''' or '''notary public''' to help with the paperwork to transfer legal ownership of the home in exchange for the purchase price of the home. | Most home buyers hire a '''lawyer''' or '''notary public''' to help with the paperwork to transfer legal ownership of the home in exchange for the purchase price of the home. | ||
The lawyer or notary will do a '''title search''', which shows the registered owner of the home and any charges registered against the property, such as mortgages, liens, or easements. Any existing mortgages and liens will have to be discharged by the seller as part of the sale. | The lawyer or notary will do a '''title search''', which shows the registered owner of the home and any charges registered against the property, such as mortgages, liens, or easements. Any existing mortgages and liens will have to be discharged by the seller as part of the sale. | ||
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Before the completion date, your lawyer or notary will prepare a document called the '''statement of adjustments'''. This document shows all money coming in and going out. It covers things you and the seller share, such as the annual property tax bill (the seller is responsible for the portion of the bill until the sale completes, and you’re responsible for the portion for the rest of the year). The most important figure for you is the amount you need by the completion date. This is the money you must pay, in addition to your mortgage. | Before the completion date, your lawyer or notary will prepare a document called the '''statement of adjustments'''. This document shows all money coming in and going out. It covers things you and the seller share, such as the annual property tax bill (the seller is responsible for the portion of the bill until the sale completes, and you’re responsible for the portion for the rest of the year). The most important figure for you is the amount you need by the completion date. This is the money you must pay, in addition to your mortgage. | ||
Your lawyer or notary also prepares the transfer documents and sends them to the seller’s lawyer or notary. The seller signs the documents and returns them. Then, when your lawyer or notary has your down payment money and the letter from your financial institution promising the mortgage amount, they register the transfer documents and the mortgage with the | Your lawyer or notary also prepares the transfer documents and sends them to the seller’s lawyer or notary. The seller signs the documents and returns them. Then, when your lawyer or notary has your down payment money and the letter from your financial institution promising the mortgage amount, they register the transfer documents and the mortgage with the land title office. | ||
===Step 6. Complete the sale=== | ===Step 6. Complete the sale=== | ||
When the | When the land title office confirms the registration of the transfer documents (and your financing cheque has arrived), your lawyer or notary gives the purchase moneys to the seller. | ||
The realtor is then instructed to give you the keys to the home. Enjoy! | The realtor is then instructed to give you the keys to the home. Enjoy! | ||
== | ==Who can help== | ||
===With more information=== | ===With more information=== | ||
The '''Real Estate Council of BC''', the body that licenses real estate agents in the province, offers a guide on “Buying a Home in British | The '''Real Estate Council of BC''', the body that licenses real estate agents in the province, offers a guide on “Buying a Home in British Columbia.” | ||
* [https://www.recbc.ca/buyinghome-2.html Visit website] | |||
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