Buying or selling property can be complicated, whether it’s a condominium, a detached home, a building lot, or an office building. It’s also a significant financial transaction. It’s important to get the best help you can.

Should I sell without a REALTOR®?

Homeowners who try to sell their own home generally use a REALTOR®.

Whether you are capable of handling a sale of this magnitude or whether you would be better off using a REALTOR® will depend on how you answer these questions.

  • Are you familiar with the changing real estate market to accurately evaluate your home and set a price that will satisfy you and be attractive to prospective buyers?
  • Are you familiar with real estate law and all of the regulations that affect property ownership? Are you prepared to face a lawsuit if the sale of your property is mishandled in any way?
  • Do you have good selling skills? Do you know how to advertise and market your property to get the best results?
  • Are you a good negotiator? Can you hold your ground when faced with aggressive buyers looking for bargains?
  • Do you have the time to show your home on evenings and weekends? If you take an evening off, will you miss the one chance you have for a sale?
  • Can you qualify a prospective buyer’s financial capability? Do you have the knowledge and contacts necessary to help the buyer arrange mortgages?
  • Have you considered what might potentially happen if something goes wrong with the sale? Legal fees can add up. Did you know that REALTORS® carry Errors and Omissions insurance?
  • Will you truly save money trying to sell your home yourself?

© Real Estate Board of Greater Vancouver

Understanding agency relationships

REALTORS® work within a legal relationship called agency.

The agency relationship is established through a contract between you, the client, and your agent, the company under which the REALTOR® is licensed. Most REALTOR® use a blue brochure titled Working with a Real Estate Agent to disclose the nature of the agency relationship with their client.

A REALTOR® can act for a seller or a buyer, or to a limited degree, both. Whomever they represent, REALTORS® have a legal obligation to uphold the integrity of their clients, while protecting and promoting their interests.

A REALTOR® can also provide real estate services to parties with whom the REALTOR® does not have an agency relationship. Typically called a customer relationship, REALTORS® can do the following:

  • Explain real estate terms, practices and forms
  • Assist in screening or viewing properties
  • Prepare and present offers or counter-offers at the customer’s direction
  • Inform customer about lenders and their policies
  • Identify and estimate costs involved in a transaction

A customer relationship does not include agency duties of loyalty, disclosure and confidentiality.

Seller’s Agent

Buyer’s Agent

Dual Agency

  • For your REALTOR® to list your property for sale on MLS®, the Real Estate Board of Greater Vancouver requires completion of alisting agreement.
  • Signing this agreement with you commits your REALTOR® to uphold the above obligations.
  • The listing agreement also states the compensation amount the seller will pay the REALTOR®.
  • The contract of purchase and sale is initiated when an offer is made by the buyer to purchase the sellers’s property.
  • The contract outlines the terms and conditions of the offer, such as offer price and subject conditions.
  • The seller may reject the offer or make a counter offer.
  • Once all terms have been accepted and both seller and buyer have signed the contract, each party is legally bound to fulfill the conditions of the contract.
  • Dual agency is created when an agent represents both the buyer and seller in a single transaction.
  • This can happen if a REALTOR® who is representing a buyer, sells one of their own listings to that buyer.
  • A dual agent must be impartial to both buyer and seller and fully disclose all information relating to the transaction.
  • A REALTOR® can be a dual agent only if both seller and buyer agree in writing.

Remember: always read all contracts and disclosure forms before signing. If you have questions about agency relationships contact your REALTOR®.

© Real Estate Board of Greater Vancouver

Costs of selling

Commissions and fees

REALTORS® fees or commissions vary. Compensation is always agreed to beforehand between you and your REALTOR®, There is no set commission rate in the real estate profession, and any fee or commission paid depends on the services provided by your REALTOR®, which can vary significantly depending on your needs as a client or the business model used by the REALTOR®,

When is the commission or fee payable?

  • the Standard Multiple Listing Contract provides that the fee or commission is payable on the earlier of the following:
    completion date under the Contract of Purchase and Sale; or
  • the actual date that the sale completes.

HST

If a commission or fee is payable before April 1, 2013, it is subject to the 12% HST. If a commission or fee is payable on or after April 1, 2013, then it is subject to the 5% GST,

Sellers will also pay the HST on services such as appraisals, legal/notary and moving fees.

Other

Don’t forget to ask your REALTOR® about these and other costs when calculating the total cost of selling your home:

  • Adjustments, may include property tax adjustments
  • Final maintenance and utility costs
  • Lawyer or notary fees and expenses – attending to execution of documents
  • Costs of clearing the title, including:
    • Discharge fees charged by encumbrance holders
    • Pre-payment penalties
  • Insurance – should maintain until the latter of either the date when you receive the proceeds of sale or when you vacate the property
  • Real estate commission fee
  • Moving fees

© Real Estate Board of Greater Vancouver

What is a contract and when is it legally binding?

A contract is a legally binding agreement between two or more parties and describes the rights and obligations of the parties to the contract.

Where a contract has been properly drafted and signed by the parties to the contract, and where the terms are clear and the contract is not for an illegal purpose, then it is likely that a Canadian court would consider the contract valid and enforceable.

Only the parties to a contract can sue or be sued under the terms of that contract.

Before you sign a contract

1. Never sign a contract if you don’t understand it.
2. Before you sign a contract, consult your REALTOR®, your REALTORS®’ managing broker, and/or your lawyer for advice.

As a general rule, Canadian courts expect that if you have signed a contract, you have agreed to it and you will therefore be bound by its terms. You may not be protected if you claim you did not understand what you were signing. Always make sure you understand a contract before you sign it.

Standard form contracts

The real estate contracts used by REALTORS® are standard form contracts. The wording and terms of these contracts have been prepared by lawyers and have been tested in Canadian courts.

Cancelling a contract

If you have signed a standard form Multiple Listing Contract, Exclusive Listing Contract or Exclusive Buyer Agency Contract and you wish to cancel the contract early, you can only do so if the other party to the contract (your REALTOR®’s company) agrees. The Real Estate Board cannot require its members to cancel listing or buyer agency contracts early.

If you have signed a contract to buy or sell a property (contract of purchase and sale) and wish to cancel it you should seek legal advice without delay. REALTORS® are not parties to these contracts and therefore cannot cancel them unless the contracting parties agree, in writing, to do so.

What happens if a buyer or seller doesn’t fulfil the terms of a contract?

Even though your REALTOR® may have drafted the contract to sell or buy a property for you, s/he is not a party to that contract. A REALTOR® cannot force his/her client to fulfil the terms of a contract with the buyer or seller. If the buyer or seller does not fulfil the commitments they have made in the contract, you may have legal recourse and should seek legal advice.

If you do not have a lawyer, you may wish to contact the Lawyer Referral Service: 604.687.3221. If you have difficulty understanding English then you may wish to contact organizations like S.U.C.C.E.S.S., call 604.684.1628 for assistance.

Here are examples of common issues for which the buyer or seller (not the REALTOR®) is responsible:
• Buyer does not close the sale.
• Buyer does not remove the contract’s subject clauses.
• Seller does not close the sale.
• Seller does not remove the contract’s subject clauses.
• Property is left untidy or dirty by the seller.
• Seller has removed items that were included in the contract.
• Transaction does not close on time.
• Appliances break down or a previously unknown property defect reveals itself after closing.

Your REALTOR® and his/her brokerage may be able to assist you to resolve this type of complaint. Typically your REALTOR® will contact the other party’s REALTOR® or brokerage and let them know about your concerns and ask them for assistance in resolving your concern. As noted, your REALTOR® cannot force the other party to do what they said they would do in the contract. (For this, you need the assistance of a lawyer or the Courts.)

More information: Professional Standards and FAQs

© Real Estate Board of Greater Vancouver

Property Disclosure Statement

Buying a home is a significant investment and requires careful evaluation.

In 1991, the BC Real Estate Association, the provincial association for REALTORS®, introduced the Property Disclosure Statement (PDS).

This document is a detailed form that asks a property seller to disclose any defects to a prospective buyer.

This document is not required by law, however, the REALTORS® of BC decided to make the PDS (and its complementary forms, the Strata Property Disclosure Statement and the Rural Property Disclosure Statement) available to any client wanting to list a home on the MLS®. The PDS can be legally incorporated into the Contract for Purchase and Sale.

The PDS goes beyond current legal disclosure obligations and itemizes potential problems for prospective buyers, such as buried fuel storage tanks, asbestos insulation, unauthorized rental suites, renovations done without a permit, moisture problems, unregistered easements or encroachments, and whether the home was ever used as a grow-op or drug lab.

The Strata Property Disclosure Statement covers a range of condominium-specific issues such as parking and storage allocations, special assessments, restrictions on age, pets or rentals and building envelope problems.

The Rural Property Disclosure Statement identifies issues related to rural land, such as the quality of well water, septic systems and flooding problems.

The PDS is not required by law. In some situations, such as an estate sale, the seller may not have enough information to complete the PDS, and the buyer will need to rely on other sources of information.

The PDS is also not a legally-binding warranty of the property’s condition. It is only a report of what the seller knows about the property.

Although the PDS is never a substitute for a thorough, professional home inspection, it is a great place for buyers to begin their due diligence investigation into any home they are hoping to purchase.

By choosing to create the PDS, the REALTORS® of BC sought to provide the public with an additional level of certainty when they purchase a home.

© Real Estate Board of Greater Vancouver

What other costs are involved beyond the price of a home?

Deciding to buy or sell a home is a milestone moment in anyone’s life – and also one of the largest financial transactions. That’s why it’s important to go into the process as knowing all of the costs involved in buying or selling a home beyond the asking price of the property.

Here’s an overview of costs involved in buying and selling a home.

Buying costs

Mortgage application

Lenders may charge a mortgage application fee, which will vary depending on the lending institution.

Mortgage insurance

The federal government requires high-ratio mortgages (with less than 20% down payment) to be insured against default. The cost ranges between 1.25 to 3.75 per cent of the mortgage amount which is added to the mortgage principal.

Appraisal fees

Before your lender approves your mortgage, you may be required to have an appraisal done. Sometimes your lender will cover this cost, if not, you are responsible. The fee ranges and is typically as much as $300.

Land survey fees

Lenders may require a survey of the property. Survey costs vary.

Home inspection fees

A home inspection is a report on the condition of the home that can alert you to any potential issues such as structural and moisture problems, as well as electrical, plumbing, roofing and insulation. Fees can range from $500 – $700 depending on the size of the home and the complexity of the inspection. Some inspectors have surcharges for a secondary suite, a crawlspace, over even an older home.

Harmonized Sales Tax (HST)

Buyers of newly constructed homes must pay a 12% federal Harmonized Sales Tax (HST) on the sale price until March 31, 2013. There is an Enhanced HST New Housing Rebate of 71.43% of the provincial portion of the HST on new or substantially renovated homes priced up to $850,000 up to a maximum rebate of $42,500. Homes priced at $850,000+ are eligible for a flat rebate of $42,500.

Buyers will also pay the HST on services such as appraisals and home inspections, survey fees and legal/notary fees.

Goods and Services Tax (GST)

Buyers of newly constructed homes must also pay the 5% GST on the sale price. There is a federal GST Rebate of up to 36% per cent of the GST for homes priced at less than $450,000. The maximum rebate s $6,300.

2% BC Transition Tax

This is a new tax coming into effect on April 1, 2013. It applies to the sale of new residential homes that are 10% or more complete on April 1, 2013, with ownership or possession occurring on or after April 1, 2013 and before April 1, 2015.

Property Transfer Tax

Payable at the time the property is registered at the Land Titles office. The rate is 1% per cent on the first $200,000 and 2% on the remainder. There is a rebate for qualifying first-time buyers of homes priced up to $425,000 and a proportional rebate for homes priced up to $450,000. The PTT on a $500,000 home is $8,000.

Property taxes

Some lenders require property buyers to add property tax installments to monthly mortgage payments.

Pre-paid property taxes or utility bills

A buyer typically is required to reimburse the seller for any prepayments.

Mortgage life insurance

If your client(s) pass away, this type of insurance will pay off the balance owing on their mortgage.

Fire and liability insurance

Most lenders require property buyers to carry fire and extended coverage insurance and liability insurance.

Home insurance

Buyers will a mortgage will be required to buy home insurance. To be safe, make the insurance effective on the earlier of either the completion date or the date that you pay the balance of the funds in trust.

Legal or Notary Public fees

Legal or notary public fees and expenses will likely apply to assist with drafting documents and ensuring the title of the home is transferred properly and without incident.

Moving fees

Moving fees vary depending on the distance moved and whether professional movers do all of the packing. Rates vary.

© Real Estate Board of Greater Vancouver

Financing your home

When you’re looking to buy a home, it’s important to understand the steps for getting a mortgage.

Mortgage terminology

Before approaching lenders, you should get to know some basic mortgage concepts. You can start by visiting the Glossary section and read up on mortgage-related terms.

Get pre-approved

Pre-approval of a mortgage is when your lender has reviewed all your financial information and has determined the maximum amount of money you can borrow. The advantages include that you:

  • know how much you can borrow, so you don’t waste time looking at properties you can’t afford
  • don’t have to worry about rising interst rates while shopping for a home, as usually the mortgage borker will guarentee the current interest rate for 60 to 90 days
  • have an edge when you make an offer, because the seller knows you’re more likely to get a loan
  • save time when you apply for your loan because you’ve already assembled your paperwork

Where to get pre-approved

Many banks and financial institutions are competing for your business so it makes sense to shop around for a mortgage. Most lenders will reduce their posted interest rate so don’t be shy about bargaining. Your ability to bargain for a low rate and a flexible mortgage will often depend on how much business you have with the institution. You can contact banks and credit unions directly, or work with a mortgage broker. A broker will help you find a lender and the best mortgage package.

Once you have selected your lender, you will need to provide your financial information. Your lender will want the following:

  • Personal information such as number of dependents and marital status
  • Details of employment, including a letter from your employer verifying your salary
  • Banking and investment information
  • Details of your assets (i.e.- a car, other property)
  • Information on loans and other liabilities
  • Permission to do a credit check

After your application is complete, you will know how much you can borrow and you will be ready to start searching for a home.

Mortgage Payment Tips

Whether you’re a first-time buyer or you’ve decided to refinance your home, consider the following money-saving steps when calculating your mortgage payments:

  • By shortening your loan repayment or amortization period to 20 years from 25 years, you’ll pay your mortgage off five years sooner. You’ll pay higher monthly payments, but you’ll build equity faster and you’ll pay less in interest over the long term.
  • Apply for a prepayment option. If you receive one, you can directly pay down some of your principalbefore it’s due. Make sure to check for prepayment penalties.
  • By paying biweekly instead of monthly, you’ll make 26 payments in a year or 13 months instead of just 12 months and reduce your amortization to about 20 years from 25 years.
  • Mortgage calculator


Example:

Home price $472,800 (MLS® HPI price of a townhome in Greater Vancouver as of March 1, 2012)
Mortgage $47,280 10% down payment
$425,520 mortgage amount
Monthly payments $2,013.54 2.99% amortized over 25 years
$178,540.14 total interest cost
$604,060.14 total cost over life of mortgage
Accelerated biweekly payments $1,006.77 2.99% amortized over 25 years
$156,606.94 total interest cost
$582,126.94 total cost over life of mortgage
Savings $21,933.20 total interest cost

© Real Estate Board of Greater Vancouver

New rules for mortgage finance in Canada

The government has announced that as of July 9, 2012, new rules will apply to government-backed insured mortgages where the borrower has less than a 20% downpayment.

The government will:

• reduce the maximum amortization (pay back) period on a mortgage to 25 years from 30 years;
• lower the maximum amount borrowers can refinance to 80% loan-to-value (LTV) from 85%;
• limit the Gross Debt Service (GDS) ratio to a maximum of 39% of income. The GDS ratio represents the amount of household income spent on the mortgage, property taxes and heating;
• limit the Total Debt Service (TDS) ratio to a maximum of 44% of income. The TDS ratio represents the amount of household income spent on all debts including the mortgage; and
• limit government-insured mortgages to homes priced at less than $1 million. Buyers of homes priced at $1 million or more must have a minimum 20% downpayment.

The new rules apply to mortgages on residential property with four units or less.
They DO NOT apply to:

• Mortgages with a 20% downpayment or more which don’t require government-backed mortgage insurance;
• Borrowers renewing their existing insured mortgages, where there are no new funds being added to the mortgage; or
• Development or construction of multi-unit buildings of five units or more, owned by a landlord.

What will the new rules cost home buyers?

Comparison of mortgage loan payments on a $625,100 home
before and after new rules
Interest rate Before new rules
30-year amortization
(monthly payment)
After new rules
25-year amortization
(monthly payment)
$ and % increase in
monthly payment
3% $2,366 $2,662 $296 or 11%
4% $2,675 $2,959 $284 or 10.6%

Refinancing

What will the new rules cost buyers refinancing a home valued at $625,000?
• When refinancing at 85%, the home owner can access up to $531,250
• When refinancing at 80%, the home owner can access up to $500,000

Four years of tightening borrowing rules

This is the fourth time in four years that the government has tightened borrowing rules.
• In 2008, the government reduced the maximum amortization period to 35 years from 40, required home buyers to have a minimum down payment of 5% (compared to the previous 0% down), and introduced new loan documentation standards.
• In 2010, the government required all borrowers to meet standards for a five-year fixed-rate mortgage, reduced the maximum amount borrowers could refinance to 90% from 95%, and for non-owner-occupied investment properties, required a minimum 20% down payment.
• In January 2011, the government reduced the maximum amortization period for government-backed insured mortgages to 30 years from 35 years and reduced the amount borrowers could refinance to 85% from 90%.

New mortgage rules at a glance in Canada

Mortgage activity Rules before July 9, 2012 Rules on or after July 9, 2012
Applying for new high ratio mortgage (less than 20% down) Maximum 30-year amortization Maximum 25-year amortization
Applying for mortgage with a 20% down payment or more No set maximum No set maximum
Applying for high ratio mortgage for $1 million+ High-ratio, government-backed insurance available; maximum 30-year amortization Not available
Mortgage renewal Doesn’t apply if additional funds are being added Doesn’t apply if no additional funds are being added
Mortgage refinancing Can refinance LTV ratio of up to 85% Can refinance LTV ratio of up to 80%

Questions about the new mortgage rules

What is required to qualify for an exception to the new parameters?
A The new measures apply as of July 9, 2012. Exceptions will be made to satisfy a binding purchase and sale, financing or refinancing agreement where a mortgage insurance application has been made before July 9, 2012. While the changes come into force on July 9, 2012, any mortgage insurance applications received after June 21, 2012 and before July 9, 2012 that do not conform to new measures must be funded by December 31, 2012.

Will a purchase and sale agreement dated prior to July 9, 2012 be considered binding if there are outstanding conditions that have not been fulfilled prior to July 9, 2012?
A Yes, if the date on the purchase and sale agreement is earlier than July 9, 2012, and a mortgage insurance application has been made prior to that date, the new parameters will not apply, even if the conditions of the agreement have not been fulfilled.

Will the new refinancing rules allow a borrower with a mortgage above 80 per cent loan-to-value (LTV) to refinance by extending the amortization period?
A No. Effective July 9, 2012, borrowers will not be permitted to refinance a mortgage above an 80 per cent LTV, unless the borrower has a binding refinance agreement dated prior to July 9, 2012, and a mortgage insurance agreement has been made prior to that date.

I have a written mortgage pre-approval from a lender, dated before July 9, 2012 with a 30-year amortization. Will I be eligible for a 30-year amortization if I don’t sign an agreement of purchase and sale until July 9, 2012 or later?
A No, a mortgage pre-approval without an agreement of purchase and sale is not sufficient to qualify for a 30-year amortization. You may have a 30-year amortization only if your agreement of purchase and sale is dated before July 9, 2012 and you have made a mortgage insurance application before July 9, 2012. You may wish to discuss with your lender to revise your mortgage pre-approval using the new parameters announced.

Will the new parameters apply to assignment (“switch” or transfer) of a previously insured loan from one approved lender to another?
A No. As long as the loan amount and amortization period are not increased, the new parameters will not apply to a switch/transfer/assignment of the mortgage to a different lender.

If I sell my current home and buy another, will the new parameters apply if I transfer the outstanding balance of my insured mortgage to the new home?
A As long as the outstanding balance of the insured loan, the LTV ratio and the remainder of the amortization period are not increased, the new parameters will not apply when the mortgage insurance is transferred from one home to another.

What if I need to increase the amount of my insured loan when I sell my current home and buy another?
A In this situation, the new parameters will apply for any insured loan.

If I bought a condo that is not expected to be built for another two years, will the new parameters apply?
A If you bought a condo and have made a mortgage insurance application on or before June 21, then the new parameters would not apply. If you buy a condo and make a mortgage insurance application after June 21, the new parameters will apply if the mortgage loan is not funded by December 31, 2012.

Remember to seek advice from a lender about mortgage pre-approvals under the new rules.

For information, visit www.fin.gc.ca and select News (left hand side) and then Harper Government Takes Further Action to Strengthen Canada’s Housing Market. Here you will find a backgrounder and a detailed FAQ.

© Real Estate Board of Greater Vancouver

What is an Offer to Purchase?

When you decide to buy a property, your REALTOR® will prepare what is known as an Offer to Purchase. The standard form used for this is called the Contract of Purchase and Sale. Once accepted by the parties it becomes the contract between the buyer and seller.

Verbal offers

It’s important to note that while any verbal communication about offers, counter-offers and acceptance of offers can be useful to the parties, in British Columbia a contract dealing with land is not enforceable against the parties unless it has been made in writing and properly signed by all parties to the contract. If you do not have a written contract, agreed to by all the parties, then you do not have an enforceable real estate contract.

Offer to Purchase

It contains the date of your offer, the description of the property you are making the offer on, the amount of your deposit, the amount you are offering (based on data provided by your REALTOR®), the amount you intend as your down payment and financing details, as well as your name and address and the name and address of the owner of the property you want to buy, subject-to clauses, closing dates, and any special requirements you want to impose on sellers (for example, you want the kitchen appliances).

Your REALTOR® can advise you every step of the way when you make an Offer to Purchase.

Presentation of offer

Once your offer has been prepared and you have signed it, it will be presented to the seller without delay through the seller’s REALTOR® (unless otherwise instructed by the seller).

Buyers’ REALTORS® have a right to be present when their buyers’ offers are presented to sellers unless the seller has given his/her REALTOR® written instructions to the contrary.

Sellers’ REALTORS® are obligated to advise buyers’ REALTORS® in advance if more than one offer is to be presented unless they have received written instructions from the seller to do otherwise. If more than one offer is being presented, the offers are presented to the seller in the order in which they were written. Buyers’ REALTORS® may only be present when their own buyer’s offer is presented to the seller.

Decision time

Once all the offers have been presented, the seller’s REALTOR® and the seller consult in private and decide how they will deal with the offer(s).

Sellers are entitled to deal with offers as they choose. Sellers do not have to accept an offer even if it is for the full asking price. Sellers are not obligated to counter an offer or otherwise respond to an offer, although most do.

In multiple offer presentations, the seller can accept or counter any offer of his/her choosing, and is not bound to deal with the highest or first offer if s/he does not wish to do so.

Sellers’ REALTORS® are obligated to advise buyers’ REALTORS® of the seller’s decision in writing, if they are asked to. Seller’s REALTORS® are not obligated to disclose any information about other buyers’ offers nor the seller’s reasons for dealing with a particular offer.

As agents for their clients, both sellers’ and buyers’ REALTORS® must not reveal confidential information about their clients.

Buyers who are involved in a multiple offer presentation should consider making their best offer, the first time, to encourage the seller to deal with their offer instead of another buyer’s offer.

Remember: even though a REALTOR® has drafted the buyer’s offer s/he is not a party to that contract. REALTORS® cannot force their clients to fulfil contractual terms (or to deal with your offer).

If the buyer or seller does not fulfil the commitments they have made in the contract the injured party may have legal recourse and should seek the advice of a lawyer.

More information: Professional Standards and FAQs

© Real Estate Board of Greater Vancouver