Buyer FAQ

In Canada, a home appraisal and a home inspection serve different purposes when buying a home:

• Home Appraisal: This is an assessment of a property’s market value, usually required by a lender to secure financing. A licensed appraiser evaluates the home’s size, condition, location, and recent sales of comparable properties to determine its fair market value. The goal is to ensure the home is worth the amount being loaned.
• Home Inspection: This is a thorough examination of a property’s physical condition, typically requested by the buyer. A certified home inspector checks for structural issues, safety concerns, and potential repairs in areas like the foundation, roof, plumbing, electrical systems, and HVAC. The goal is to inform the buyer about the home’s condition before finalizing the purchase.

While an appraisal protects the lender, an inspection protects the buyer by uncovering potential problems before the sale is completed. How much is property purchase tax & are there exemptions? In British Columbia, the Property Transfer Tax (PTT) is a tax levied on the transfer of real estate and is calculated based on the property’s fair market value (FMV) at the time of registration with the Land Title Office. The current PTT rates are:

• 1% on the first $200,000 of the property’s FMV
• 2% on the portion of the FMV between $200,000 and $2,000,000
• 3% on the portion of the FMV between $2,000,000 and $3,000,000
• 5% on the portion of the FMV exceeding $3,000,000

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Exemptions from the PTT are available under certain conditions:

1. First-Time Home Buyers’ Program: This program offers a full or partial exemption to qualifying first-time homebuyers. To be eligible, the purchaser must be a Canadian citizen or permanent resident, have never owned a principal residence anywhere in the world, and have lived in British Columbia for at least 12 consecutive months immediately before the date of registration, or have filed at least two income tax returns as a British Columbia resident in the last six years. The property must be used as the principal residence, have a FMV of $500,000 or less for a full exemption (with a partial exemption available for properties valued between $500,000 and $525,000), and be 0.5 hectares (1.24 acres) or smaller.

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2. Newly Built Home Exemption: This exemption applies to newly built homes, including newly subdivided units, substantially renovated homes, and certain other properties. To qualify, the purchaser must be a Canadian citizen or permanent resident, and the property must be used as the principal residence, have a FMV of $750,000 or less for a full exemption (with a partial exemption available for properties valued between $750,000 and $800,000), and be 0.5 hectares (1.24 acres) or smaller.

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3. Additional Transfer Tax Exemption: In certain circumstances, such as transfers between related individuals, transfers resulting from marriage breakdowns, or transfers to registered charities, an exemption from the additional transfer tax may be available.

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It’s important to note that these exemptions have specific eligibility criteria and application processes. Prospective homebuyers should consult the official British Columbia government resources or seek legal advice to determine their eligibility and ensure compliance with all requirements.

Lawyers and Notaries tend to be competitive for fees charged to transfer the title of a property. One of the main differences to consider is that a lawyer can represent your interests in court, should something happen with the deal that forces it in that direction. This doesn’t mean however that the lawyer you hired is one that would go to court. You still may have to engage a different lawyer. For a purchase contract, budget approximately $1200 + fees and $500-$600 if there is a mortgage involved. Or $400-$500 without a mortgage. When it comes time to sell, budget approximately, $1100 + $300-$400 with a mortgage or $200-$300 without a mortgage.

Buying a home is one of life’s biggest decisions.  Sometimes a little extra time is needed to make sure you made the right choice. Here’s what you need to know about the Home Buyer Rescission Period. As of January 3, 2023, when a seller accepts your offer to purchase a home, you’ll have three business days to cancel the contract. This is called the “right of rescission.” If you change your mind and choose to exercise your right of rescission, you’ll need to notify the seller – your real estate licensee can help you with this. You’ll need to pay a 0.25% fee to the seller.  If you made a deposit, this fee will be deducted from the deposit and the balance, if any, must be returned to you. Speak with us for any questions you might have about the Home Buyer Rescission Period and how it might impact you.

In its simplest form, title insurance protects the lender and homeowner against a number of risks related to the property’s title or ownership. What does Title Insurance cover? From the point of view of most lenders, the main coverage is fraud, which can occur in a variety of ways. With identity theft on the rise, it is not difficult for a fraudster to obtain legitimate identification claiming to be the true owner. The fraudster then deals with realtors and lawyers as if they were the owner, and proceeds to sell the property. Alternatively, the fraudster may work with a lender or mortgage broker, again with identification, to place a new mortgage on the property. In either situation, the true owner is unaware of the fraud and the fraudster absconds with the sale or mortgage funds. Other typical examples include spousal impersonation and lawyer fraud. In most cases the Assurance Fund of the Land Title Office may reimburse the true owner, but this may take several months and thousands of dollars in legal fees. Title Insurance is usually quicker and less expensive. In addition to protecting against title fraud, title insurance can cover: 1. violations of municipal by-laws; 2. encroachments onto an adjoining property; 3. property tax arrears; 4. existing work orders; 5. lack of legal access to the property; 6. unpaid strata assessments; 7. zoning and setback non compliance; 8. forced removal by a governmental authority of a structure built without a required building permit; 9. legal status of any septic system; 10. gap coverage. How much does Title Insurance Cost? For properties with a purchase price under $1,000,000.00, the cost of title insurance is generally $225.00, with $175.00 to the Lender Policy, and $50.00 to the Owner Policy. For every additional $1,000.00 over a purchase price of $1,000,000 the price increases by $0.90. Unlike life or house insurance, purchasing title insurance is a one time cost, with no annual premium. How do I order Title Insurance? The easiest way to order title insurance is to ask your lawyer to order it as part of buying or refinancing the property. There is no extra fee to order the policy. How do I get the deposit to my Realtor? The deposit on your offer will typically be collected upon final subject removal, once you have satisfied the due diligence agreed upon within the offer. You will need provide my office with the deposit via certified funds, most often a bank draft. Though wire transfers are an option. I can pick that up from you our you can bring it into our office.

In British Columbia, Canada, Goods and Services Tax (GST) of 5% is due on the purchase of a new or substantially renovated home. It is not typically applied to resale (used) homes.

When is GST Payable?

GST is charged on the purchase price and is usually paid at the time of closing. The buyer typically pays the GST to their lawyer or notary, who then remits it to the government.

When Does GST Apply?

GST is applicable on:

• Newly built homes (including pre-sale condos)
• Substantially renovated homes (if 90% or more of the structure has been replaced)
• Vacant land sold by a developer
• Short-term rental properties purchased for business use

Are There Any GST Rebates?

Eligible buyers may qualify for a GST New Housing Rebate:

• Full rebate: If the home costs $350,000 or less (primary residence), you can receive a 36% rebate, effectively reducing the GST to 3.2%.
• Partial rebate: For homes priced between $350,000 and $450,000, the rebate is gradually reduced.
• No rebate: If the home is $450,000 or more, there is no GST rebate.

For investment properties, a New Residential Rental Property Rebate (NRRPR) may be available if the home is rented out for long-term residential use.

It’s always best to check with a lawyer, notary, or tax professional to ensure compliance and eligibility for any rebates.