The Society of Notaries Public of BC conducted an internal online survey of Notary members on key real estate topics in November 2015, which identified the most frequent mistakes or misunderstandings made by people either selling or buying residential real estate. Notaries from Greater Vancouver, the Fraser Valley, Vancouver Island, Northern B.C., and the Okanagan, Kamloops and Kootenay regions participated in the survey.

“For most British Columbians, our home is our biggest asset; so buying or selling can be one of the most important financial decisions we make,” said Tammy Morin Nakashima, President of BC Notaries and a Notary in Steveston. “A lot of thought and attention to detail is needed when either selling or purchasing a home, so experience and expertise can make a big difference.”

Notaries provide conveyancing or other legal services on more than half of all real estate transactions in B.C. and are highly trained and experienced in both simple and complex real estate transactions.

“In many cases, buyers or sellers haven’t correctly calculated or anticipated all of the costs involved with the purchase or sale of a home, which can lead to unwelcome surprises,” said Akash Sablok, a Notary in Vancouver.

8 most common mistakes or misunderstandings among buyers and sellers:

  • Not everyone realizes Notaries can complete real estate documentation;
  • Not knowing whether they qualify for a Property Transfer Tax exemption;
  • Many buyers are unfamiliar with all the costs and fees required to complete their purchase or sale;
  • Sellers are often unaware that GST is payable on top of on realtor commissions;
  • Confusion about each of the key dates: completion/closing and adjustment/possession;
  • Some people don’t understand that the mortgage lender processes applications but notaries/lawyers prepare the mortgage documents;
  • Not using a realtor;
  • Misunderstanding the property tax year and payment cycle

In response, BC Notaries have prepared a list of tips for buyers and sellers:

How to Avoid Common Real Estate Mistakes:

1. Beyond the Purchase Price – Understand the Property Transfer Tax (PTT) and eligible exemptions.

The PTT is charged on the agreed price of a property at a rate of 1% on the first $200,000, and 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000. The rate goes up to 3% on the portion greater than $2,000,000. If the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018). If the property is classified as residential and farm, or is residential mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.

If you are a Canadian citizen or permanent resident purchasing a used home below $500,000, and this is the first home purchase for at least one of the buyers, then you would qualify for either a full or partial exemption from the property transfer tax. Full details of this exemption as part of the Province of B.C.’s First Time Home Buyers’ Program are available online.

When looking at purchasing a pre-owned home, if one or more of the purchasers don’t qualify as a first-time home buyer, only the percentage of interest that the first-time home buyer has in the property is eligible for exemption. For example, if one partner qualifies and owns a 50% interest in the purchase of a $475,000 home with a partner who has previously owned a home, 50% of the tax amount would be eligible for the exemption, which would mean a tax exemption of $3,750. An equal amount, the remaining 50%, would be paid to the government by the non-exempt partner.

As of February 17, 2016, any Canadian citizen or permanent resident purchasing a newly-built home priced up to $750,000 as a principal residence to live in for at least a full year may also be exempt from the property transfer tax – a savings of up to $13,000. Partial exemptions are available for new housing valued up to $800,000. More details about the Newly Built Home Exemption are online.

2. Budgeting for Buyers – costs and fees typically involved in purchasing a home.

In addition to the buyer’s down payment, costs may include: Property valuation fee:

  • Site survey
  • Home inspection
  • Adjustments for City/municipality property taxes Adjustments for local utilities (water and sewer) Adjustments for strata fees
  • Property Transfer Tax
  • Property insurance & Binder fee Legal fees
  • Title insurance
  • GST (and transitional rebate)

3. Budgeting for Sellers – costs and fees typically involved in selling a home.

  • In addition to paying the Realtor’s commission, costs may include:
  • GST on the Realtor’s commission
  • Pre-payment penalties on mortgage discharges
  • Holdbacks of Strata fees
  • Adjustments for City/municipality property taxesAdjustments for local utilities (water and sewer)
  • Adjustments for strata fees
  • Legal fees

4. Calendar Clarification – The difference between the completion date and the possession date.

The completion date (sometimes called “closing date”) in a real estate contract is the date the property is transferred, and the money for the purchase is transferred from the buyer to the seller. The possession date is the date the buyer has the right to take possession of the property, also known as the move-in date.

The adjustment date is the date from which the buyer takes over the costs of the property.

5. Dot your i’s and cross your t’s: Notaries make sure these documents are properly prepared or in place:

  • Mortgage documents – related to borrowing and securing funding from a lender
  • Title search – ensuring the property is owned by the “seller” and unencumbered
  • Insurance documents
  • Strata documents and forms (for strata properties) – these determine any special assessments, fines, penalties or fees outstanding; confirm strata fees; preparation of necessary forms
  • Arrange and secure deposits and transfer funds to lender and/or purchaser
  • Property transfer and confirmation

6. The nitty-gritty: who does what with your mortgage documents, down payment and closing costs.

Lending institutions take care of approving the loan and related conditions (interest rate, term, etc.) but a legal professional, like a Notary, prepares the mortgage documents. A Notary will also draw up a statement of adjustments to add to the balance of the down payment, and will take care of ensuring these disbursements are paid once they receive payment from the buyer. The Notary will usually provide the buyer with a total adjustment amount when they sign the paperwork a few days before the closing date.

7. Leave it to the professionals – use a Realtor.

Buying or selling a home is a major financial decision. A Realtor’s full-time job is to act as a liaison between buyers and sells and they can ensure that offers are made with the appropriate terms and subjects attached, and that documents, such as strata council minutes, are made available for reviewing before you make your commitment.

8. Taxes are inevitable, and annual property taxes are typically due in July.

The property tax year is the same as the calendar year; it’s just that property taxes are due at the beginning of July.

Unsplash photo by Aurélien Bellanger