From listing to closing, what you should know
Whether you are experienced with buying and selling real estate or a first-timer, the process involved in acquiring property is exciting but also stressful.
Who should I list with? How much is my property worth? What kind of property suits my lifestyle?
There are so many considerations when buying and/or selling that the prospect can seem overwhelming. Buying or selling a property is a major transaction that involves planning and preparation.
Buying Property in Canada14
When it comes to buying real estate in Canada, each province can have different rules and regulations, so it is important to receive advice from a real estate agent, lawyer and accountant who specialize in the area in which you want to live.
Mortgage
As a Canadian resident, financing is typically available at 75% of the purchase price for a primary residence over a 25-year term. For a non-resident, the ratio is generally 65% mortgage and 35% as a down payment.
Qualifying for the mortgage financing is probably the same as in other countries – interviews via phone, fax, e-mail to gather personal information which includes assets/liabilities, employment and/or income information. Each borrower’s application will be considered on a case-by-case basis.
Your realtor will be able to advise you on suitable mortgage brokers.
The mortgage approval may take approximately 24-48 hours after application and documentation has been submitted to the lender. The documentation generally required is income verification, tax returns, credit bureau or bank’s report (letter from borrower’s own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal.
Foreign banks cannot register mortgages in Canada, so any mortgage would have to be registered via a Canadian mortgage broker.
The borrower will require the services of a Canadian lawyer or notary public to prepare the mortgage documents and registration at the Land Titles office. Documents can be couriered outside Canada for signing – this will need to be arranged with the lawyer and lender well in advance of the completion date.
Making an Offer to Purchase
Once you have chosen a real estate agent, you need to give the vendor an Agreement of Purchase and Sale (also called an Offer to Purchase).
This Agreement states the legal names of both buyers and sellers, the civic address of the property, the price that is being offered for the home, any items in and around the property that are being included in the sale – itemized under ‘chattels included’, the amount of the deposit, the closing day (the date that you take possession of the home – in Canada this is usually 30 – 60 days after the Agreement of Purchase and Sale has been signed), request for a land survey to be carried out (if applicable), the date the offer expires, other conditions (such as a home inspection, property appraisal, lender approval of mortgage financing).
Once the offer is made and accepted, a deposit is payable. Once the buyer has signed the document, it becomes legally binding. If the buyer withdraws from the offer, the deposit may be lost and the buyer could be sued.
Once the Agreement has been signed by the buyer, it is presented to the seller who is at liberty to make changes to the price, completion date and chattels. The changes are initialled by the seller and returned to the buyer for review. Once both sides are in agreement, the resulting Agreement of Purchase and Sale will state the purchase price and the deposit. The deposit is placed in a trust account and is credited towards the purchase price once the offer has been accepted by both the seller and the buyer and the transaction is complete.
Additional Costs and Fees when Buying and Selling Property
The following represents many of the additional costs and fees incorporated when buying property. Your realtor will be able to let you know which are applicable in your Province.
Taxes
Non-residents of Canada pay tax on income received from sources in Canada. The type of tax paid, and the requirement to file income tax returns, depends on the type of income received.
Canada has tax treaties with many countries, including the United States and the UK. A tax treaty is designed to avoid double taxation for people who would otherwise pay tax on the same income in two countries.
Property Transfer (or Purchase) Tax / Land Transfer Fees are calculated between 0.5-2% of the property’s total value. They are generally 1% of the first $200,000 of the value and 2% of the remainder.
As of December 2007, the Ontario Provincial Land Transfer Tax exemption for first time buyers (up to $2,000) now applies to resale as well as newly constructed homes.
Similarly, from February 2008, Toronto (and this may spread to other provincial cities) has its own Land Transfer Tax which allows first-time home buyers of both new and resale homes to qualify for a rebate. If the property is vacant land, the house must be constructed within one year of closing and the buyer must live in the house for the balance of the year. There are other criteria needed as well to qualify for the PTT exemption, so it is best to consult a lawyer or notary.
Clearance Certificate
The typical fees associated with preparing and filing a clearance certificate, paid by the seller, range from $300-$1000, depending on the complexity of the transaction.
Harmonized Sales Tax (HST)
In Ontario, the HST is 13%. On July 1, 2010, Ontario introduced a federally administered Harmonized Sales Tax (HST) that applies to most purchases and transactions. The HST applies to newly constructed homes, but does not apply to resale homes. Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.
Property Tax
This is an annual fee levied within local communities, which means there are many different rates within each province. The difference between Property Tax and Land Transfer Tax is that LTT is a one-time provincial tax which comes into effect upon transfer of property and Property Tax is paid annually to the local taxation authorities. It is determined by applying the value of the property as assessed by the provincial assessment authority to the current tax rates as stated by the local tax authority.
The amount can differ each year but generally Property Tax falls between 0.5-2.5% of the home’s market value
14Author Unknown; “Buying Property in Canada”;http://www.besthomesbc.com/buyingincanada.html; 2014-03-27