Why Use Buyer's Agent?

Across British Columbia, advocacy groups and licensing laws now encouage buyer representation.  From locating suitable properties to contract negotiations and settlement, seek a  BC real estate agent who will be YOUR representative in buying  BC real estate.

As a consumer, how often do you buy BC  real estate property? Once, twice, three times in your lifetime? Purchasing BC real estate is a complex and major transation with many details to be handled.  In the majority of cases the seller will be represented by an agent.  Wouldn't you want to have complete and fair representation in the BC real estate transaction?

Compare BC real estate Buyer Agent vs. Seller's Agent, vs. Dual Agency

Traditional System (Seller's Agent) Under this system all Brokers and Agents (including the agent who sells you the home) are Agents for the Sellers and have a duty to represent the SELLER'S best interests, including: Negotiate for the highest price possible Structure the transaction to the Seller's advantage A BC realtor who is not your Agent cannot: Recommend or Suggest Price Inform you or his/her principal's top/bottom line. Disclose any confidential information about his/her principal unless otherwise authorized.

Dual Agency Relationship A dual agency results when the buyer (client) wishes to purchase property that is listed with the same company that the BC realtor representing them works for. In this instance the Broker/Agent cannot disclose: Price Seller is willing to accept Price Buyer is willing to pay

Buyer Agency Under this system the Selling Agent is the Agent for the BUYER and has a duty to represent the Buyer's best interest, including: Negotiate for the lowest price possible Structure the transaction to the Buyer's advantage This method could save you thousands of dollars, provides you with a Competitive Market Analysis of the property before you make an offer, allows the agent to show you both listed and unlisted properties and costs you absolutely NOTHING!

If you are a Buyer your preferred situation is outlined in Box 3.  If you are a Seller your preferred situation is in Box 1. 

The Benefits of Using a Buyer's Agent

Using a Buyer's Representataive offers the consumer many benefits.  A  Buyer's Representative will:

• Evaluate the specific needs and wants of the buyer and locate properties that fit those specifications
• Assist the buyer in determining the amount that they can afford(pre-qualify) and show properties in the price range and locale the buyer has determined.
• Assist in viewing properties and either accompany the client on the showings or preview the property on behalf of the client to ensure that the identified specifications are met.
• Research the selected properties to identify any problems or issues to help the consumer in making an informed decision prior to making an appropriate offer on the property.
• Advise the client on structuring an appropriate offer to purchase the selected property.
• Present the offer to the seller's agent and seller on client's behalf.
• Negotiate on behalf of the buyer client to help obtain the identified property.  Keep in mind that the buyer agent will be doing so with their clients best interests in mind.
• Review and explain all legal documents to their buyer client.
• Recommendations and assistance in securing appropriate financing for the selected property
• Provide a list of potential qualified vendors, e.g. movers, attorneys, and carpenters, if these services are needed by the buyer.

Most importantly, the buyer can be confident that they are fully represented throughout the real estae transaction.

Buying a home can be a "hair-raising" experience. It can be a roller coaster of emotions... finding the right place... securing the loan... moving in. And if you're like most of us, your home will be your largest investment. The emotions over such a large and personal purchase can often cloud good business judgment.

Many home buyers do very little research before "diving in" and investing their hard-earned money. Before doing that, doesn't it make sense to be as informed as possible? That's what this report is all about. It's designed to help you avoid common, critical mistakes many  BC real estate buyers make. If you follow these 10 suggestions, with the help of the right BC real estate professional, you'll make a good sound business decision that you'll be happy and proud of for years to come.

1. Build a team - a good BC realtor will have well established relationships with lenders, lawyers, notary publics, qualified home inspectors and other professionals. These professionals are there for your benefit and your buyer's agent can make all the introductions.

2. Get Pre-qualified - Lenders will provide you with a certificate of pre-qualification. By getting pre-qualified, you know exactly what financial parameters to stay within. Your buyer's agent and lender will consult with you and help you get qualified for the loan that best fits your needs. Many times, they are able to get you a larger loan than you may have thought possible.

3. Interview your BC realtor - Sit down with a competent buyer's agent and honestly discuss your BC real estate goals. Spend time up front to assure yourself that this BC realtor is going to be your  realtor of choice. You want to make a good sound business decision that you'll be happy and proud of for years to come. Your  realtor could play a major role in guiding you through to the correct decision.

4. Become Completely educated - a professional buyer's agent will walk you through the buying process step by step (even before you start to look at houses.) This process will: clarify the use of any documentation; preview different types of contracts; highlight pitfalls to watch for; show how to view properties; review the negotiation process; reveal hidden costs; and, identify other elements of making a home purchase. This approach helps to eliminate the stress in buying a home. Make sure you take the time to do this, believe me it will pay off in spades. The CMHC consumer guide and workbook is a good reference manual. (I frequently pass it on to clients after our brief consultation)

5. Know your market - get an overview of the market and start by identifying the type of market you are buying in, is it a balanced, buyer's or seller's market? Is the market changing? Ask your BC realtor.

6. Property selection - once your buyer's agent comes to realize your goals he can screen out the homes that don't meet your needs or your budget. A good BC realtor will keep you informed daily of any new listings that fit your search criteria. E-mail transmission has become a standard method of communicating this information. As you view properties, take notes and give each house you have viewed a nickname. This process will be fun and it helps in making references when you communicate with your partner.

7. Strata properties - require a little more reading. Make sure you review the minutes of the strata meetings (at least two years). Study the bylaws and financial statements and take the time to talk to the property management people. Your BC realtor will protect your rights contractually as you take the necessary time to review these important documents. Make sure a professional inspector inspects the property.

8. Comparable Market Analyses (C.M.A) - insist on reviewing a C.M.A. on any property you are considering purchasing. The C.M.A. will give you details of houses for sale, recent sales, and expired listings in the area of your choice. It will guide you to a fair offer and worn you of potentially overpriced product.

9. Conditional offers - once you've found a home that meets your needs and your price range, your BC realtor can draft and present the vendor with an Offer to Purchase. Most offers are conditional offers. For example the offer is good only on the condition that you obtain mortgage financing or that the house passes a home inspection. A good BC realtor will assure using conditions on the contract that best suit your buying situation.

10. Loyalty Breeds Loyalty - Be open, honest and up-front with your team. Hard feelings and disloyalty will cause headaches, delays or may even keep you from getting into the home you worked so hard to locate. Take the time to select the right team in the beginning and your first home purchase will be a simple, easy and profitable experience you'll have fond memories of... for years to come.

My hope with this report has been to educate you and help you avoid the pitfalls many home buyers go through. I hope you found the ideas valuable and if there is ever any way I can be of service to you or anyone you care about, please contact my office. Your initial consultation is always completely free of charge and you're under no obligation of any kind. We'll sit down for 60 minutes... no high-pressure, just plain, honest talk about what it's going to take to achieve your personal goals. Go ahead, pick up the phone and give me a call. I'd love to hear from you!

When you are considering buying  BC real estate, you will need to have additional funds set aside for closing costs. These costs can add up to a substantial amount. The following is a list of the most common costs, with an indication of prices. Check with your BC realtor to learn what the costs will be in the area where you are intending to purchase.

Purchasing Cost Summary

Definitions

APPRAISAL ($350 to $Thousands)

Lending institutions usually require an appraisal to be done to confirm the property value, and to make sure that it is the kind of property they will mortgage - for example, some lenders will not finance hobby farms or heritage designated homes.

It is not part of the appraiser's function to look for structural problems. For that task, you need a building inspection.

The appraiser will consider the size of the property (both land and buildings), the location of the property and the condition of the main house to determine a 'replacement value'. She or he will then compare the property with a few recent sales of similar properties in the same area.

The appraiser will arrive at a dollar figure that, in his or her professional opinion is a fair market value for the property. It is not unusual for the value to be the same as the purchase price of the property.

Problems can occur if the appraised value is lower than the purchase price and you are making the minimum possible down payment. In most cases, the lending institution is obligated to lend mortgage money based on the lower of the purchase price or the appraised value.

When the appraisal is below your purchase price, you have 4 choices:

• renegotiate your purchase price,
• collapse the deal,
• come up with the difference between the appraised value and the purchase price - over and above the equity you already have, or
• pay for another appraisal to be done by another firm. Sometimes different firms will arrive at different prices, but this is a gamble.

There are occasions when you may be willing to pay higher than the appraised value - for example, when there is more than one offer at the same time, the vendor will choose the 'best' offer. Or perhaps this is the house of your dreams and you are willing to pay extra to buy it.

ASSESSED VALUE

Local property taxes (which pay for items such as municipal services e.g. police, fire and ambulance departments, sewers, sidewalks etc.) are calculated based on the assessed value of your property. Appraisers working for the local tax authority will give each property an estimated value based on its approximate size and location.

These values are rarely accurate when it comes to fair market value, but are sometimes used by the lender (instead of a full appraisal) when the loan amount is low compared to the purchase price.

It should be noted that not all provinces / local governments use this system for determining property taxes.

BUILDING INSPECTION ($350 to $600)

A building inspection (also called a home inspection) will identify problems with a house. For example, is the roof leaking or needing replacement? Do the beams have woodrot? Is the foundation sinking? An inspection does not give any indication of property value.

The building inspector will usually give you a list of necessary repairs and sometimes an approximate cost for each.

You should make your purchase agreement subject to a satisfactory building inspection. What if there is a problem? Your BC realtor with you. There are various solutions, depending on the problem.

• You could decide the problem is minor and accept the property as is.
• You could try to negotiate a reduction in purchase price.
• The vendor could fix the problem to your satisfaction.
• If any major structural faults are found, or if the combined total of minor problems is in excess of an agreed amount, you can refuse to remove the 'subject to...', walk away from the deal and have your deposit refunded.

GST (Goods & Services Tax)

7% GST is charged on most types of services involved in the BC real estate transaction. Some examples include: legal fees, BC realtor commissions, appraisals, and surveys.

GST is NOT charged on the purchase price when you are buying a previously occupied residence. This includes a house, apartment, vacation property or non-commercial hobby farm.

GST IS charged when you are buying (or building) a newly constructed residence (house, apartment etc.). The entire amount including land value is subject to the tax. If the residence is to be owner-occupied then you may qualify for a GST rebate of approximately 36% of the GST charged see examples that follow.

GOODS AND SERVICES TAX REBATE FOR RESIDENTIAL BC real estate PRICED BETWEEN $350,000.00 AND $450,000.00

For homes with a fair market value of under $350,000.00, a rebate is available of 36% of the G.S.T. For example, if the fair market value is $300,000.00, the gross G.S.T. would be $21,000.00 (7% of $300,000.00). The rebate would then be $7,560.00 (36% of $21,000.00). Thus the net G.S.T. would be $13,440.00 ($21,000.00 less $7,560.00).

For homes with a fair market value of $450,000.00 or more, no rebate is available. G.S.T. in the amount of 7% is payable on the entire purchase price. For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula:

A X ($450,000.00 - B) / $100,000.00

"A" is the lower of $8,750.00 or 36% of the G.S.T. and "B" is the greater of $350,000.00 or the fair market value of the home. For example, assume the value of the home is $400,000.00. The rebate would equal:

$8,750.00 X ($450,000.00 - $400,000.00) / $100,000.00 = $4,375.00 Using this example, the G.S.T. payable would be $28,000.00 (7% of $400,000.00) less $4,375.00 which would equal $23,625.00.

Note that this rebate is only available to individuals and a company is not eligible for this rebate.

Please remember that the rules regarding G.S.T. frequently change. While we try to keep our website up to date as much as possible, please do not rely upon the information without talking either to a lawyer or accountant.

HOUSE INSURANCE ($350 to $850)

House insurance covers the replacement value of the building(s), premiums will vary depending on the value. Lenders insist on house insurance because the property is their security for the loan. Your lawyer will need confirmation that insurance has been arranged.

Should your house burn down, the insurance company is required to pay the lender first. You will still own the lot and will then have to re-negotiate with the lending institution to borrow to build a new house.

If you rent all or part of your house, be sure to declare this to your insurance company to avoid any future problems arising from insufficient or invalid coverage.

Discuss with your insurance broker other aspects of house insurance such as: contents, liability, and business coverage if you intend to run a home business.

LAND TRANSFER TAX / PROPERTY TRANSFER TAX

PROPERTY TRANSFER TAX AND FIRST TIME HOME BUYER'S INFORMATION

The Property Transfer Tax is a tax payable to the Provincial Government by purchasers of BC real estate. The tax applies to all types of BC real estate, whether residential, commercial or industrial.

Transfer Tax is 1% on the first $200,000.00 of the property's fair market value and 2% on The amount of the Property the remaining fair market value.

For example, if the fair market value of the property is $150,000.00, the tax payable would be $1,500.00 ($1% of $150,000.00). If the fair market value of the property is $250,000.00, the tax payable would be $3,000.00 (1% on the first $200,000.00 = $2,000.00 and 2% on the remaining $50,000.00 = $1,000.00).

"Fair Market Value" is best described as the price that would be paid for a property on the open market (which is usually the actual purchase price paid for the property). If the transfer of property is taking place without the exchange of money, the fair market value must be the fair value of the property if same was sold on the open market. In some situations, the fair market value is determined by the recent Assessment received from the Assessment Office.

There are a number of exemptions available to purchasers so that the tax is not payable. The most common is the exemption for "First Time Home Buyers." To qualify for an exemption to the Property Purchase Tax as a First Time Home Buyer, the following criteria must be met:

• Purchaser must never have owned an interest in a principal residence anywhere in the world at any time;
• Purchaser must be a citizen of or a permanent resident of Canada and have resided in B.C. for at least one year prior to the purchase or have filed two income tax returns as a British Columbia resident within the last 6 years;
• To obtain full exemption, the purchase price must not exceed $275,000.00 in the Greater Vancouver, Fraser Valley and Capital Region Districts ($225,000.00 in Whistler and elsewhere). A partial exemption is available for homes between $275,000.00 and $300,000.00 (see formula below);
• Mortgage Financing must be at least 70% of the fair market value of the property, and must have a term of at least one year (special rules apply for mortgages that have a term of less than one year and demand mortgages);
• Purchaser must move into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year;
• Pro rata exemption where property exceeds .5 hectares or a portion of the property is not residential (i.e. commercial lofts) - purchase price of entire property must not exceed the price limitations.

To calculate the amount of tax payable on homes between $275,000.00 and $300,000.00, use the following formula:

Amount of PTT X ($300,000.00 - Purchase Price) / $25,000.00

For example, assume a house is being purchased for $285,000.00. Normal Property Transfer Tax would be $3,700.00 (i.e. 1% on the first $200,000.00 and 2% on remainder). Using the formula:

$3,700.00 X ($300,000.00 - $285,000.00) / $25,000.00 = $2,220.00.

Subtract $2,220.00 from $3,700.00 leaving $1,480.00 as the amount owing for the Property Transfer Tax.

Other exemptions exist as well, such as a transfer of a principal residence between family members. For details on this and other exemptions, go to http://www.rev.gov.bc.ca/itb/ and pick the "Property Transfer Tax" button located on the right hand side on this screen.

Property Transfer Tax should not be confused with Property Tax. The Property Transfer Tax is a one time tax paid to the Provincial Government by purchasers of BC real estate. The Property Tax is the tax paid on an annual basis to the local City/Municipality

LEGAL FEES ( $450 to $2500)

The lending institutions require you to have a lawyer or notary prepare and register the mortgage contract. You can usually choose your own lawyer and as the fees can vary it is wise to shop around.

Some lenders will insist on you paying for two separate lawyers - one to represent the lender and one to represent your interests. When only one lawyer is used by both parties he or she will not represent either party should a dispute arise.

You may wish to have your lawyer review your purchase agreement as a condition of your offer. Prior to completion date, lawyer will set up a meeting with you to explain the mortgage documents and witness your signature. He or she will also give you a statement of adjustments and disbursements detailing the various amounts of money you have to pay to complete the transaction.

Avoid 'deals' arranged by lenders where only your signature is witnessed and you are not represented by a lawyer. You may save a couple of hundred dollars, but the legal representation is worth it when you are borrowing so much money!

MORTGAGE BROKER FEES ($0 to $Thousands)

For the vast majority of mortgage applications, mortgage brokers do not charge the client any fees. Brokers are paid by the lending institution. The fees paid by the lending institutions are very similar, so the main reason for your broker to place your mortgage with one lender over another is to get you a better rate or a better product.

Ask your broker to show you the different mortgage interest rates and explain why she or he thinks the product offered by one institution is better than another.

In some cases, brokers charge fees. Fees are charged for various reasons when the financing is through private lenders, and when commercial property is purchased. Fees may also be charged in other circumstances. In all cases, your broker will tell you up front if there will be a fee. You will be informed in writing of the amount of the fee.

If, for any reason, you are unhappy with the service a broker provides, you may change brokers. The original broker should be 'fired' in writing and a copy of that letter provided to the new broker. You must check to see if the broker has incurred any charges on your behalf, as you will have to reimburse these costs. Many lenders will not deal with a new broker if the original broker has submitted an application or pre-approval to them.

MOVING EXPENSES ($200 to $Thousands)

These costs vary greatly, depending on how much furniture you have to move - and how far you are moving. For example, the cost of a few friends helping someone to move a bachelor apartment will be much less than moving the contents of a four bedroom house across the country.

If you are going to hire a professional moving company to do the work for you, you should definitely shop around as rates vary significantly. You may also want to consider the savings of packing everything yourself versus having the moving company do this for you.

Don't forget to take into account the cost of insuring your possessions against moving accidents.

PROPERTY TAX ADJUSTMENT ($0 to $Thousands)

No matter what time of year you are buying your house, there will be an adjustment of property taxes. In some cases you will owe the vendor - in other cases the vendor will owe you. Property taxes pay for your local services such as fire, police & roads (see assessed value).

Property taxes are calculated for the calendar year (January to December). In some municipalities these are paid once a year - in early July. In other areas, such as Vancouver, they are paid twice a year - January and July. In some parts of the country, taxes are collected quarterly or even monthly!

Your lawyer will find out how much the property taxes are for the new residence and will calculate how much the vendor owes and how much the purchaser will owe. This depends upon the adjustment date on the purchase agreement.

For example:

· You are buying in Vancouver

· your taxes are $1,825 per year

·  taxes are due July 4th

·  your adjustment date is September 30th Your lawyer will divide $1,825 by 365 (days in the year) then multiply by the remaining number of days in the year, in this case 92 days.

$1,825 / 365 x 92 = $460

In this case you will owe the vendor $460.00

In some cases the vendor will owe you money!

For example:

• You are buying in Vancouver
• your taxes are $1,825 per year
• taxes are due July 4th
• your adjustment date is February 28th

Your lawyer will divide $1,825 by 365 (days in the year) then multiply by the amount of time from January 1st until your adjustment date, in this case 59 days.

$1,825 / 365 x 59 = $295

In this case the vendor will owe you the amount of $295.00 - however, when July 4th comes around you will have to pay the whole annual tax bill of $1,825.00

BC realtor FEES (Usually Free for Buyers)

The vendor (the person selling the house) usually pays these fees. The amount of the fees must be taken into account if you are selling one property and buying another. The amount of the fees will reduce the amount of money you have available after the sale is completed. BC realtor fees are subject to the GST.

RENOVATIONS

Don't forget to allow funds for any repairs you may want (or need) to make.

SURVEY ($250-$800)

A legal survey is frequently required by the lending institution. The survey shows the exact legal boundaries of your property and the exact location of all buildings, rights of way, and any other encroachments.

Examples of a right of way are the Hydro power lines. The Hydro authorities have the legal right to their power lines and towers, and the right to access your property to maintain these structures.

An example of an encroachment is when part of a neighbour's building extends over another's property boundary.

The reason a lender requires a survey is to make sure that your building does not illegally encroach another's property. If this is the case, the neighbour could insist on the removal (destruction) of the offending building! Frequently the vendor will have a copy of the survey certificate and gives or sells it to you, with a declaration to the lawyer that there are no changes. In such cases, new surveys may not be needed.

One recent development is the introduction of title insurance. This is a way of avoiding the need for a survey. However, you are not protected by this title insurance. If you are encroaching a neighbour's land you could still lose part of your property. Title insurance protects lenders and lawyers.

TITLE INSURANCE ($250)

Title Insurance is a form of insurance policy that protects purchasers from a number of potential risks.

These risks are usually matters which are not covered by a traditional lawyer's due diligence. Briefly summarized, these added protections include the following:

1. Defects that would be revealed by a new Survey. In the absence of an existing survey, Title Insurance may be ordered in lieu of a new survey. Please note that this assumes that a new survey must be ordered. If the vendor is able to provide an older survey or if the applicable City Hall has a survey certificate, these may usually be utilized. Title Insurance also insures a defect that would be revealed by an existing survey such as an encroachment of a neighbour's building onto the adjacent property. Fraud, Forgery or False Impersonation. A Title Insurance Policy is not qualified by "the authenticity of the title documents obtained." What this means is that if an innocent person acquires an interest in a property from someone who is acting in a fraudulent manner (for example a false vendor), they can be compensated. The lender is also insured in the event of lawyer or third party fraud.

2. Errors in Public Records. While this is not as relevant in British Columbia given our Torrens System, Title Insurance does cover errors in public records, including incorrect information on Tax Certificates. Please remember that Title Insurance may frequently change along with the coverages and while we try to keep our website up to date as much as possible, please do not rely upon the information without talking to a lawyer.

UTILITY CONNECTIONS ($200/$300)

Last, but not least, don't forget the additional costs that all our wonderful utility companies charge us to connect to their services!