Whether you are making your first home purchase, selling your house, or gathering information, there are a lot of real estate terms that you may not be familiar with, but that’s ok! We are here to help, and to assist you in getting started we have included some terms and definitions that you may encounter when dealing with real estate.
When the purchaser is not a Canadian citizen or permanent resident or is a foreign corporation, there is an additional Property Transfer Tax on residential property by as much as 20 per cent. If you are a foreign buyer, you need to discuss the tax that could be charged on your property purchase.
The date agreed on by both parties to a real property transaction for the adjustment of property taxes, rent, interest, and other items.
Some lending institutions require an appraisal of the property before approving a mortgage. In some cases, it may be your responsibility to cover the cost.
This is the date when money changes hands and the title is transferred to the buyer’s name. Completion happens before the new owner takes possession of the property to provide sufficient time to process the transaction.
A standard Contract of Purchase and Sale includes all of the important details about the transaction, and once signed is the binding document between the seller and the buyer.
Sellers require a deposit, which is negotiable and is typically five to 10 per cent of the purchase price in the offer. Deposits are made as certified cheques or bank drafts payable to your Realtor’s brokerage and are held in the brokerage’s trust account. Deposit funds count towards the total purchase price.
A down payment is the money you have in your bank account to apply to the property purchase. Most lending institutions require that you put down between five to 10 per cent of the purchase price. If your property is under $1,000,000 and your down payment is less than 20 per cent of the purchase price, your mortgage needs to be insured by the Canadian Mortgage Housing Corporation (CMHC) and you will incur additional fees based on the purchase price.
When purchasing a newly constructed home, you may be subject to a Goods and Services Tax (GST).
The Home Buyer’s Plan allows each first-time home buyer to withdraw up to $25,000 from their RRSPs to purchase a residential property without having to pay taxes at the time of withdrawal. The amount must be repaid over a period of 15 consecutive years.
Interest is the cost of borrowing money. Interest rates are competitive between various lenders, so you should shop around to get the best rate available at that time.
After obtaining an accepted offer, you will need to engage a lawyer or notary public to execute the real estate contract and transfer ownership. Fees vary, so shop around and ask people for references.
Some lending institutions charge a mortgage application fee, which can vary between institutions.
The term of your mortgage is the length of time you are committed to a mortgage rate, the lender and the associated conditions. Terms range from six months up to 10 years, although the most common is five years
This is the most common type of contract between sellers and Realtors. It is highly recommended for maximum exposure because the property will be listed on the Multiple Listing Service (MLS®). In this arrangement, commissions are shared between the seller’s Realtor and the buyer’s Realtor and their respective brokerages.
If the previous owners have already paid the annual property taxes, you are required to reimburse them for your portion of the taxes, effective from the closing date. This is typically arranged by a third-party legal professional such as a lawyer or notary.
This is the date the new owner can take possession of the property. When negotiating this date, consider if there are any time frames affecting your choice, such as the possession date of your next property. Your Realtor will be able to help you align the dates for a smooth transition between relinquishing your old property and moving to a new one.
The three page PDS is a form filled out by the seller disclosing what they know about their property. The PDS itemizes potential problems such as asbestos insulation, unauthorized rental suites, renovations were done without a permit, and unregistered easements or encroachments. This document has a series of questions that allows the sellers to disclose any latent defects (a fault in the property that could not have been discovered by a reasonably thorough inspection before the sale).
The BC government imposes a Property Transfer Tax of one to three per cent, depending on the value of the property, which must be paid when a home is transferred to a new owner. Some buyers may be exempt. We can advise you about this expense given your specific circumstances.
In Canadian Real Estate contract negotiation, “subject to” clauses are a home buyer’s safety-hatch. A way to escape the contract if something goes wrong. Three of the most common clauses are: subject to financing, subject to inspection, and subject to sale.
When lawyers and Real Estate professionals talk about “Title”, they are referring to who has legal ownership and the right to use a piece of property. An easy example is to relate this to the board game Monopoly. By purchasing Boardwalk, you are now the owner of the title. The title will also list any easements, rights of way, covenants, building schemes, etc. that may affect the property.