For many people in Kamloops, buying a home is the single biggest investment they will make in their lifetimes. Mistakes can be expensive and most people cannot afford to get things wrong.
It helps to understand more about the residential real estate buying process — what buying a home in Kamloops entails in terms of the financial commitments you must make beyond meeting the sale price of the home itself.
Certain closing costs and taxes apply and non-residents must consider certain conditions placed on their real estate purchases. This can lead to unwanted surprises and stress during the closing process, which can, in turn, delay the much-anticipated day when you collect the keys and move in.
The residential real estate purchase lawyers at Taylor Janis LLP in Kamloops can help you avoid that and ensure that the purchase process goes smoothly for you.
What closing costs and adjustments apply to purchases?
The following are the main costs and adjustments required at closing.
A residential purchase with a mortgage will generally incur legal costsof between 150 and 500 including expenditures for title searches, title transfer, mortgage registration, transparency declaration filling, State of Title Certificate, etc.These costs usually apply even if you do not retain a lawyer or notary public.
Taylor Janis includes professional fees and title search/registration fees in our charges but third-party closing costs, associated taxes, and other disbursements are not included (more about these charges below).
THIRD-PARTY CLOSING COSTS
These costs can vary from one home purchase to another. A lawyer from Taylor Janis will help with obtaining the following:
- A municipal tax certificate ($50 to $90)
- An insurance binder indicating if there is any loss payable to a buyer’s lender ($35 to $80)
- A survey certificate, title insurance or Western Law Societies Conveyancing Protocol (title Insurance usually costs $175 or more depending on purchase price and mortgage amount)
- Professional Software/Platform fees of between $23.10 and $80.00.
Your lawyer can advise you on precisely what you need depending on the type, location, mortgage, and purchase price of your property.
Additionally, for strata title property, your lawyer can help to obtain a strata form F and form B (if applicable) (which costs $35 to $150).
PROPERTY TRANSFER TAX (PTT)
PTT is a provincial tax payable when the new owner of any real estate purchased in B.C is registered with the Land Title and Survey Authority. First-time buyers may get an exemption from this tax (see below).
How much you pay will depend on the value of the residential property:
- One percent on the first $200,000 of the property’s fair market value
- Two percent on any value above $200,000 up to $2 million
- Three percent on any portion greater than $2 million, plus a further two percent on the fair market value above $3 million
The applicable amount will need to be provided to our lawyer to submit to the government when the registration with the Land Title and Survey Authority is submitted.
In addition to the property transfer tax, if you’re a foreign national, foreign corporation or taxable trustee, you must pay the additional property transfer tax on your proportionate share of a residential property’s fair market value if the property is within specified areas of B.C. The tax rate is 20% on the fair market value of your proportionate share.
GOODS AND SERVICES TAX (GST)
If you are the first occupiers of a new or substantially renovated property you will need to pay GST at a rate of five percent of the purchase price.
Your lawyer will check the contract before you sign it to ascertain whether the price includes GST or not. This is important as GST can add up to many thousands of dollars.
If you use the property as your primary residence, you can apply for a GST rebate of up to 36 percent if your home is valued below $450,000.
If you plan to rent out the property you purchase, speak to your lawyer about whether you can claim a rebate.
EXEMPTIONS FOR FIRST-TIME HOMEBUYERS
The Property Transfer Tax (PTT) on large home purchases can be a significant sum. For first-time buyers, a full or partial exemption applies.
To qualify for an exemption, the property buyer must:
- Be a Canadian citizen or permanent resident, and
- Have resided in B.C. for a least 12 months, or
- Filed income tax returns as a resident of B.C. for two of the six preceding taxation years
- Never previously have owned a primary residence anywhere in the world
The applicable level of the exemption depends on the value of the property purchased:
- Full exemption for properties with a purchase price of $500,000 or less
- Partial exemption for properties with a purchase price between $500,000 and $525,000
- No exemption for properties with a purchase price at or above $525,000
First-time homebuyers in B.C. may also benefit from the Home Buyers’ plan. This allows you to withdraw up to $25,000 from your RRSP without paying tax on it.
To qualify, you must meet the following criteria:
- The purchased home must be your primary residence (existing or new)
- The RRSP must be repaid within 15 years (with minimum payments of 1/15th of the withdrawn amount)
First-time home buyers should not try to navigate the property purchase process in B.C. without the assistance of a knowledgeable and experienced real estate lawyer.
EXEMPTIONS FOR BUYERS OF NEW HOMES
If you buy a newly constructed home and are resident in B.C, you can apply for a full or partial exemption from PTT.
The full exemption applies for properties of 1.24 acres or smaller and valued at up to $750,000. A partial exemption applies for newly constructed homes valued at between $750,000 and $800,000.
You must move into the home within 92 days of registering at the Land Title Office and continue to occupy it as your primary residence for the remainder of the first year.
“Closing adjustments” are payable by the buyer when a property changes hands in B.C. These are usually set out in a document called the Statement of Adjustments. This document is essentially a balance sheet indicating the total remaining funds payable to complete the purchase.
This document covers the seller for the payment of any property expenses that will ultimately benefit the buyer. A breakdown of the buyer’s costs will cover items such as the following:
- Municipal property taxes and utilities
What special considerations apply to non-resident buyers?
People who buy a residential property in B.C. but are non-residents of Canada face some extra challenges and considerations.
For instance, non-resident buyers will face extra hurdles when applying for a mortgage and will need to open a Canadian bank account. There are also extra challenges with getting the relevant documents signed and transferring the funds.
Because non-residents are not present at the closing process, it is essential to retain the services of a real estate lawyer.
If you are a non-resident interested in purchasing property in B.C. speak to one of our experienced real estate lawyers and seek professional Canadian tax advice.
What is the purchase closing process in B.C.?
Once you’ve found the property you want and agreed on a fee with the seller, residential purchases of real estate in B.C. should retain a real estate lawyer as soon as possible in the purchase process.
Your lawyer will usually manage the following steps:
- Arrange how title to the property is held: “joint tenants” jointly own 100% of the property while a “tenant-in-common” arrangement allows each individual to own a fixed percentage of the property.
- Conduct a title search, obtain municipal tax information and any additional information necessary to prepare the Statement of Adjustments.
- Prepare closing documents including title transfer, mortgage, property transfer tax forms and Statement of Adjustments.
- Send the seller’s closing documents to the seller’s lawyer for execution.
- The signing of the documents and delivery of the balance of the down payment or equity (usually one to three days before closing)
- Registration of the transfer and mortgage documents
- Arrange for the seller’s lawyer to collect funds and notify you that the purchase has been completed.
Contact Taylor Janis in Kamloops for help with your residential estate purchase
That’s it. You’re ready to move in and will receive the keys from your real estate agent on the allotted Possession Date.
There may be some small variations to the above processes and fees but this should act as a good guide and prepare you for the purchase of residential real estate in B.C.
For informed advice on how to proceed with a purchase, contact a lawyer at Taylor Janis LLP in Kamloops for an initial consultation.
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Alfonso Chen is a civil litigator in our Vancouver office who can provide services in both Mandarin and English. He has appeared before and won cases in the Supreme Court of British Columbia, the Provincial Court of British Columbia, and numerous tribunals.