Home sweet home. It's likely your largest investment. When it's time to buy or sell it, many
issues will come up. Here are a few to consider:
The Contract
It's perfect. Even your in-laws approve of your dream home. Just sign on the dotted line and
move in, right?
But let's take a closer look at that contract. Rover might be upset if he doesn't get that
designer dog house.
The contract of purchase and sale sets out all your legal rights. It sets out
- what's included with the house
- what conditions must be met before the transfer goes ahead ("subject" clauses)
- when everything will happen (completion date, adjustment date, possession date)
- how to deal with limitations on property rights (easements, encroachments, etc.)
See "What's in a Contract of Purchase and Sale" for more
information.
To protect your interests, ask a lawyer to review the contract before you sign. It's also
wise to have her check the title to the property, review any irregularities with you, and
advise you on purchase procedures.
If there's more than one buyer, she'll also ask whether you want to own the property as
joint tenants or tenants in common. This choice determines what happens to the property when
a co-owner dies.
Most contracts of purchase and sale say the transfer is "subject to" financing,
inspection, and so forth. Once these conditions have been met, your lawyer can draw up the
documents.
See also our section on lawyers' fees.
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What buyers should check
A buyer needs to find out up front whether the seller has the right to sell. Your lawyer can
check the title to the property to make sure the seller is the registered owner, and whether
anyone else has rights to it, such as mortgages, easements or rights of way. Contractors also
often file builder's liens to recover unpaid construction costs.
Next, do any fences, garages, etc. extend onto a neighbour's property? That's called
encroachment. For about $300, you can get a surveyor to check. While you're at it, look for
potential environmental hazards. For example, you may be liable for any toxic construction
materials.
Finally, especially if you hope to build a new house on the land someday, look into the
zoning bylaws for the area.
See "Caveat Emptor: Look Before You Buy" for more
information.
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Taxes and Insurance
When registering the property transfer at the land title office, buyers usually need to pay
property transfer tax. This is one per cent of the first $200,000, and two per cent of the
balance. For example, on a $425,000 house, you would pay $6,500 (one per cent of $200,000 and
two per cent of $225,000). Certain transfers, such as transfers between qualifying relatives
where at least one party lives in the house, are exempt.
In general, if you buy a new or substantially renovated home, you must also pay GST (goods
and services tax), based on the full purchase price, subject to certain exemptions and rebates.
Sales of other homes are not subject to GST. If the seller says the property is exempt from
GST, or agrees to include it in the price, make sure that is a term of the contract.
You should also ensure that the house is insured on the completion date, when title transfers.
Then, if the house burns down or gets damaged that day, you're covered. Most lenders will
insist on this, and that they be the payee if there's a damage claim.
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The Mortgage
Most purchases are financed through mortgages, legal charges registered against title to
secure payment of a loan. The documents are normally prepared by a lawyer acting for the bank
or other lender, and will set out the amount, interest rate and payment schedule.
See "Can the buyer's lawyer prepare the mortgage documents?"
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Statements of Adjustments
The purchaser's statement of adjustments sets out the costs payable on completion. These
include
- the balance of the purchase price (after deducting the deposit)
- property transfer tax
- legal fees
- GST
- adjustments for property taxes, utilities and other costs.
The vendor's statement of adjustments usually includes the sale price, less any real estate
commissions, and adjustments for property taxes, utilities and other costs.
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