Purchasing Real Estate
Purchasing Real Estate is one of the largest investments most people make in their lifetime. Whether you're buying property as an investment, or as your first home, it's important to make this process strategic and educational. The below information is intended to help prepare you for a purchase and make a choice that best fits your plan.
If at any point you have questions about the steps, market conditions, or anything Real Estate, don't hesitate to reach out to me, I'd be happy to speak with you.
A Step-by-Step Guide to Purchasing Real Estate
Writing an Offer
Subject Removal Period
Completion & Possession
The first step to purchasing Real Estate is to get pre-approved for a mortgage. Pre-approval will tell us what our budget is, and will allow us to write an offer on any property that we find.
To get pre-approved you can either book an appointment with your bank, or work with a mortgage broker. A mortgage broker is someone who will help you shop for the best deal. They’ll compare different banks/lenders to find you the lowest and best possible rate. They also aim to get you the highest budget possible that works with your finances.
Message me directly for recommendations on Mortgage Brokers.
Now that we know your budget, we can start looking for a property. Most people at this stage have already begun looking online and have an idea of what they like. The more you can tell me, the better. It may help to write down and separate the "must haves" from the "want to haves". If you have no idea where to start looking, that's alright, I'll show you different areas that I think would fit your lifestyle or investment plan, and work within your budget.
Once we've found the property you like, it's time to put a contract together and submit an offer to the sellers.
Offers can either be accepted, rejected, or countered.
For more information on the Contract of Purchase and Sale, click the video below.
An accepted offer means that both you (the buyers) and the sellers have agreed to the contract.
In most cases, this doesn't mean you've purchased the home just yet. It instead means that the sellers cannot sell it to anyone else except you for a certain amount of time. Generally this will be 7 days (but can be much shorter or much longer).
Now that our offer has been accepted, it's time to work on removing our subjects. In the contract I've added terms like "Subject to Financing", and "Subject to Property Inspection".
These subjects are what protect you and allow us to do our research before you actually pay for the property. If there is something we find that doesn't work for you, this is our opportunity to back out of the contract.
For Example, "subject to financing" means that we need to ensure your bank or lender will provide the funds for you to close on this purchase. Once we know that they will, we can remove this subject.
If everything looks great and all subjects can be removed, we'll sign the last documents to officially purchase the property.
On the same day we sign this document, I'll need your deposit which is typically worth 5% of the purchase price. The other 95% of the purchase price will get paid on the completion date.
Your completion day is the day that your lawyer files the paperwork to officially transfer the Title of the property from the sellers name to your name. It is also the day that your mortgage will start. Typically, completion is a day or two before possession.
The Possession day is the day you officially get the keys to your new property.
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Costs to Purchasing
When Purchasing Real Estate there are a number of points to consider. Below you'll find information on the different taxes, costs, definitions of Real Estate terms, and overall details of what to expect when making a purchase. It's best to consult a financial advisor or legal advisor if you want specific information on these topics. Message me and I'd be happy to connect you with people who can help.
Property Transfer Tax
Mortgage Default Insurance
Everyone who purchases Real Estate in British Columbia has to pay what's called a Property Transfer Tax. This tax is calculated by the following criteria:
1% of the Purchase Price on the first $200,000;
2% of the Purchase Price that exceeds $200,000 but does not exceed $2,000,000;
3% of the Purchase Price that exceeds $2,000,000 but not exceed $3,000,000;
5% of the Purchase Price that exceeds $3,000,000; plus
An additional Property Transfer Tax equal to 20% of the Purchase Price if the Buyer is a Foreign Entity or a Taxable Trustee as defined by the British Columbia Transfer Tax Act.
GST is a tax that is only calculated on the sale of brand new homes. For example if you purchase a pre-sale, meaning you buy a home or apartment that isn't yet built, you'll have to pay this tax. GST is charged at a rate of 5% on the total purchase price.
GST can also be charged on the purchase price of homes that have never been lived in. This means that if we purchase a home built in 2020 that has never been occupied, there is a good chance the government will require a 5% GST tax on it. This is a situational tax that I will advise you of. Most purchases (unless they are pre-sales) won't have this tax.
When purchasing Real Estate, I always advise that we do a home inspection regardless of the type or age of the property. Home inspectors will typically cost you somewhere around $500 but can save you large amounts of money in repairs. Inspectors ensure things like appliances are in working order, building foundations are solid, mold isn't present, and more.
When you purchase a home, you'll need either a lawyer or notary to do the legal transfer paperwork before you take possession of the property. This paperwork is filed on the completion day set out on the contract of purchase and sale that we've completed. These fees can range but will typically put you between $1200 and $2000 depending on the property.
In Canada, homebuyers with less than 20% down payment are required to purchase mortgage default insurance, or CMHC insurance. Mortgage default insurance protects lenders in the event a home buyer defaults on a mortgage. Because of this protection, lenders can offer lower mortgage rates for higher risk mortgages and mortgages with lower down payments which help people like First Time Home Buyers.
* The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice.