Vancouver False Creek Burrard Bridge by Harshil Shah
Buyer and Jay or Brenda discuss Buyer's needs & wishes and how they fit into the current Vancouver real estate market.
Jay or Brenda explains Agency relationships to Buyer. Jay or Brenda will outline the forms of Agency and give out the Working with a Real Estate Agent brochure, prepared by the BC Real Estate Association, which is to be signed by the Buyer in acknowledgement of receiving the Agency information.
Jay & Brenda represent the interests of the Buyer but the fees paid to them through RE/MAX Crest Realty as the Selling Broker come from the proceeds of the Sale. The Seller gives permission in the Listing Contract for the Listing Broker to pay the Selling Broker. In BC the Selling Broker holds the Buyer's deposit or earnest money in Trust till closing.
Jay or Brenda makes appointments to show suitable properties to the Buyer. Real estate practice in Vancouver differs from most other places. The listing agent of the property as well as the Buyer and Jay or Brenda attend the showings. This requires coordination of at least 3 persons' schedules and needs a longer lead time to organize. Spontaneous appointments are rare.
When the Buyer and Jay or Brenda find a suitable property that the Buyer wishes to purchase they prepare an offer to the Seller, known as a Contract of Purchase and Sale. As Jay & Brenda are acting for the Buyer under their Agency agreement they prepare background information on the subject property to help decide on an offering and possible final selling price. The Vancouver real estate market is very competitive and multiple offers from different buyers on the same property are common.
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The Buyer must wire funds for the deposit to the RE/MAX Crest Realty Trust Account upon acceptance of the Contract. The deposit required for US buyers is usually 10% of the sale price. These funds are included in the final purchase price at completion. There are delays of up to 14 days in receiving funds between US banks and Canadian banks or trust accounts. As providing the deposit in a timely fashion is a condition of the Contract of Purchase and Sale US buyers are advised to wire their deposits through a reliable third party banking service who can guarantee the safe arrival of the deposit within the required time frame. Jay and Brenda recommend the Canadian firm Custom House Global Foreign Exchange who are reliable and knowledgeable.
Mortgage Financing for US Buyers
Mortgage financing for most U.S. buyers requires a 35% down payment with financing for 65% of the purchase price. Depending on the property, sometimes a 40% down payment is necessary.
A mortgage in Canada is usually amortized over 25 years with a 5 year term. This requires the Buyer to refinance the balance owing on the mortgage at the end of the term at current interest rates. Mortgage interest is not deductible in Canada but there is no capital gains tax or requirement to reinvest in real estate if you sell your principal residence at a profit. There is capital gains tax to be paid by non-resident property owners when they sell their investment property or second home. Contact Jay Banks for further information on this topic.
Downtown from the other side by Kenny Louie
Jay & Brenda highly recommend: Gord Pipkey of Real Mortgage Services at 604 279 8090.
A Contract can be subject to financing, to inspection, to receiving all documents including title search, financial statements, status of the building etc. These subjects have to waived or removed by the Buyer by the date specified in the Contract.
Home Inspection in BC
Home inspectors are important to the process as they physically review the property for deficiencies. A home inspection can take between 2 and 5 hours, depending on the size of the property. As the qualifications of home inspectors varies, Jay & Brenda look for an engineer familiar with mechanical systems and with an eye for detail.
Brenda & Jay will give the Buyer a list of qualified home inspectors from which to choose. An average price is about $400 CDN.
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When the Buyer has approved financing in place, is satisfied with the Home Inspection Report on the property, has read all the documentation on the property and has had all his questions answered then the Buyer removes subjects. This is done as an Amendment to the Contract of Purchase and Sale and the document is prepared by Jay & Brenda.
The closing date is usually two days earlier than the possession date for the Buyer. All adjustments are made to the possession date but this does mean that the Seller stays in the property for a specified length of time after receiving payment for it.
The transaction then moves onto the lawyers or notaries for preparation of legal documents to transfer the title to the Buyer.
There are Federal and Provincial taxes that must be addressed at this time.
Federal And Provincial Taxes On Real Estate
In Canada:What to Expect
- The GST (Goods and Services Tax) is paid on all goods and services in Canada. It is 6% on everything including legal and real estate fees. The GST is paid on the purchase price of all new construction in Canada. It is paid on the purchase price of properties that have been substantially renovated or rebuilt. It is not paid on the purchase price of resale properties that have been lived in as they are deemed to have had GST paid by the first purchaser. It is not tax deductible. There is a partial rebate of the GST to the Buyer on properties that sell for less than $450,000 CDN. The GST payable on the real estate fees is paid by the Seller. It is not a responsibility of the Buyer.The Statement of Adjustments is prepared by the Buyer's Lawyer or Notary and all the above taxes must be paid on completion. The Buyer must have the funds for the above taxes available in addition to the balance of the purchase price. They cannot be included in the amount of the mortgage. The Notary or Lawyer will prepare the application for a partial GST refund if the purchase price qualifies for a rebate.
- The BC Property Transfer Tax must be paid by all buyers of real estate in the province. The tax is calculated at 1% on the first $200,000 of the purchase price and 2% of the balance of the purchase price. For further provincial real estate tax details.
Title and BC Law
British Columbia uses a modified Torrens system of registering land throughout the province. This means that in the Land Registry the name registered as the owner of the property is guaranteed by the government to be the legal owner. There is no need to search the root of title. There are no clouds on the title that are not in the Land Registry.
Title Insurance is not necessary as a general rule. In buying detached properties some buyers choose title insurance over paying for a physical land survey but title insurance is not that common.
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This guarantee of title means that the time between purchase and completion can be very short. Closing can be as few as 5 business days after removal of all subjects in the Contract.
The Buyer's lawyer or notary prepares or oversees all legal work to complete the transaction. The mortgage registration, the Statement of Adjustments (for settling all outstanding balances of taxes and fees payable), registration of title are responsibilities of the lawyer or notary. An experienced real estate lawyer can be helpful in having the transaction close with no problems.
Signing - Physical Presence Requirements
The Buyer must make arrangements to be in Vancouver to sign the documents or to have them couriered to a law office near them where all documents can be signed under seal. The funds to close the property will have to be wired to the Vancouver lawyer's trust account. There are delays of up to 14 days in receiving funds between US banks and Canadian banks or trust accounts. US buyers are advised to wire their deposits through a reliable third party banking service who can guarantee the safe arrival of the balance of the Purchase Price within the required time frame. Jay and Brenda recommend the Canadian firm Custom House Global Foreign Exchange who are reliable and knowledgeable.
There will need to be enough lead time allowed to get all this work completed by the contract dates.
Brenda & Jay will give the Buyer a list of qualified lawyers and notaries from which to choose. A ball park figure for real estate legal fees is $1200CDN + GST.
On the possession date at noon Jay or Brenda meets the Buyer with the keys and walks through the property with them before handing it over.
If you found the above information useful, don't hesitate to contact me by email or by telephone at 604.240.9700 for a more in-depth conversation about your housing needs, whether your seeking is a vacation recreation home or a full-time residence. Vancouver is a great place to visit and even better place to live.
All the best!
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