Home Buyer’s Guide – Kitsilano Real Estate
Buying a home has a lot more intricacies than most people realize, which is why you want a successful realtor on your side. Below is our home buying process, but there are slight differences in the process depending on everyone’s situation. Contact the LiveKitsilano Team for more details on the purchasing process so we can guide you through what you should expect, and take a look at our page detailing the reasons why we should represent you to buy your next home.
We’ve started a blog offering Information for Home Buyers. Check it out often as we’ll constantly be adding more information, and feel free to ask us any questions – if you’re wondering about something, someone else out there is too!
Should I Use a Realtor?
Truthfully, there is really no good reason not to. Here are the most compelling reasons to use a Realtor® when buying a home:
1) Most sellers are using a Realtor®
If you’re negotiating with a Seller, they’ll be getting professional guidance and expert advice. You deserve the same to ensure that your interests are protected.
2) It doesn’t cost you anything
In most instances the Seller offers compensation directly to the Buyer’s Realtor® upon the completion of a sale. That means that it doesn’t cost you a thing.
3) It’s a huge financial investment
Most transactions today exceed $500,000. If you had a tax audit or lawsuit of that amount on your hands, would you attempt to deal with it without the help of an accountant or lawyer?
Types of Agency Relationships:
1) No Agency
This occurs when a Buyer writes an offer with the Seller’s Realtor® with whom they have no prior relationship. Here, the agent’s obligations are to act in the best interest of the Seller NOT the Buyer.
2) Buyer’s Agent
Your Realtor® owes you the utmost loyalty and must disclose any information which might influence your decision to purchase. A Buyer’s Agent is obligated to protect your best interests.
3) Seller’s Agent
The Realtor® acting for the Seller. Buyer beware here, as the Seller’s Realtor® has no obligations to you and will pass on any information you provide that may be of benefit to the Seller.
4) Limited dual agent
When a Realtor® (or their respective brokerage) is acting for both the Buyer and Seller. There are limitations to the Realtor’s® responsibilities in this situation that both sides must agree to before accepting an offer.
Process of Buying a Home
Getting a Mortgage
Most lending institutions will pre-qualify you for a mortgage loan before you begin searching for your new home. This will give you the confidence of knowing what you can spend on a home before you begin looking.
What is a mortgage?
A mortgage is not itself a loan, but rather it is an interest in land created as security for a loan. This means that you are actually the one granting the mortgage and in return the bank is the one granting a loan.
The two types of mortgages:
1) A conventional mortgageallows borrowing up to 80% of the appraised value of the property. No mortgage insurance is required.
2) A high-ratio mortgage loan allows borrowing more than 80% of the appraised value of the property. Mortgage insurance will be required.
How much can I afford?
While the final amount will depend on several factors, most banks will allow you to borrow an amount that equates to monthly payments up to 32% of your gross monthly income (GDS ratio). This calculation will include the mortgage principal, interest, property taxes, heating costs and 50% of condo fees. There is a helpful visual mortgage calculator tool on our website.
What is a down payment?
A down payment is the amount of your own money you put towards your home purchase. Banks require a minimum of 20% of the purchase price of the home unless you utilize mortgage insurance. These premiums can be as much as 4.15% of the total loan amount but can effectively lower your down payment to 5%.
Your monthly mortgage payment is calculated as if the loan payments were going to be paid over a set number of years (typically 25 years). This is called the amortization period. The longer the amortization period you choose, the lower the monthly payment. By reducing your amortization period, you will also reduce your total cost of borrowing.
What is a term?
The term is the length of the mortgage contract. Deciding on the length of the term you want will depend on whether you think interest rates will go up or down and how much stability you want. At the end of the term, you are required to repay the full-unpaid balance or to re-finance the mortgage.
Can a mortgage be repaid?
The answer to this question can be found in the repayment clause of the mortgage document. Some mortgages, generally referred to as open mortgages, may be repaid at any time the borrower wishes. Other mortgages, generally referred to as closed mortgages, cannot be repaid until the end of the term. Payments allowed prior to the end of the term will be subject to an interest penalty for early repayment. Please speak to your lender about this clause.
Fixed rate or variable rate?
A fixed rate mortgage is one in which you interest rate will remain the same throughout the term of the mortgage and offers the advantage of stability in your monthly payments. In a variable rate mortgage, the interest rate you pay will fluctuate over time in relation to the prime lending rate and can presents risk for those on fixed incomes. Historically, variable rates have outperformed fixed rates, but many factors will impact your decision.
Can I use my RRSP’s?
First time home buyers may use up to $25,000 of RRSP funds ($50,000/couple) toward their down payment. To qualify:
- You must not have owned property in past 5 years.
- Funds must have been on deposit for 90 days.
- RRSP funds withdrawn must be clear of loans.
- RRSP’s “locked in” employer’s pension plans NOT eligible.
- Funds must be paid back over 15 years.
Mortgage Brokers are a great place to start when you are exploring your financial options. They typically have more financing options and more flexible lending criteria than traditional banks and can offer much education about the different options. Also, as they are typically paid by the lending institution, it won’t cost you anything. If you need a recommendation, we have several great contacts that will be more than happy to get you started.
Below is a list of associated costs that you will need to budget for. All of these costs will be needed either during the buying process, or when you officially become the owner:
When the lending institution requires a 3rd party appraisal of the property for financing.
Your bank may also require that a survey certificate be presented to them. (detached home only)
Home insurance: ~$400-3000/yr
Lenders require an insurance policy to help protect their interests in your new home. Strata properties will range from $400-800/year while detached homes typically range from $1000-3000/year.
Building inspection: ~$450-700
The purchase of a home is a big investment and the money spent on a home inspection is the best money you can spend. With very few exceptions, consider this process mandatory before moving forward with a purchase. It can also be a great way to learn about how to protect your investment in the future.
Legal fees: ~$800-1200
The transfer of property ownership must be recorded in the Land Titles Office. This can be done by a lawyer or notary.
Property Transfer Tax (PTT)
The Provincial Government imposes a tax of 1% on the first $200,000 and 2% on the balance, that must be paid before any property can be legally transferred. First-time buyers may be exempt if they meet the following:
- Must not have previously owned a principal residence anywhere in the world.
- Must be a Canadian Citizen or permanent resident and have resided in B.C. for a minimum of 12 months.
- Must be owner-occupied within 92 days of registration and lived in for at least 1 year.
- Subject to a maximum purchase price of $425,000 within Vancouver (sliding scale exemption to $475,000).
Goods & Services Tax (GST)
Newly constructed homes are subject to a 5% GST on top of the sale price. Partial rebates are in effect. Call 1-800-561-6900 to verify.
Real Estate Fees
Generally speaking, the Seller pays the real estate fees as part of the transaction. If this is not the case, you will negotiate this amount with your Realtor.
Other last minute costs
- Moving and packing fees
- Connection fees (for internet, TV, hydro, etc)
- Move in/out fees (for condos)
- Any renovations or redecorating
Identifying Your Search Criteria
Whether you are a first time buyer or an experienced investor, purchasing a home requires making some significant decisions. Investing a bit more time at the beginning can help you avoid expensive mistakes. When deciding your wants and needs in a home don’t just answer the basic question of needs, but look deeper into the lifestyle you are trying to achieve. Some things to consider include:
- Community: Older community “with character,” or a newer “up-and-coming” community?
- Demographic: Who else lives in your neighbourhood?
- Transit: How far will you commute? Is transit nearby?
- Schools: What are your needs?
- Amenities: Shopping? Parks?
- Construction style: Concrete or wood frame? Rainscreened?
- Exterior siding: What type? Any indication of water ingress?
- Roof: How old? Any leaks?
- Plumbing: How old? Any leaks?
- Electrical: What type of wiring?
- Pests: Evidence of termites or rot?
- Do you prefer an open floor plan for entertaining?
- Do you need a big kitchen? Gas stove? Lots of cabinet space?
- Do you need a den or office to work from home?
- Is a patio necessary or just an added convenience?
- Do you need a lot of storage? An extra parking stall?
- Do you like big bedrooms? Or do you prefer extra living space?
- How much is in the contingency reserve fund for such things as roof replacement, decorating, repairs and maintenance, etc?
- Have any special assessments been agreed upon or have any structural problems been noted, which may lead to a special assessment in the future?
- Are pets allowed? What type? How many? How big?
- Are owners permitted to rent their units to tenants? How many rental units will be allowed in the project? How many units are rented at this time?
- Ask to see current Bylaws, Rules and Regulations, the Financial Statements, Minutes of the Annual General and Strata Council Minutes.
We offer a very useful service called Automatic MLS, which should be a necessary step for anyone looking to buy in Kitsilano. This service will email you all the homes that match your ideal criteria so you’ll never miss a good listing. Try Automatic MLS today!
Making an Offer
Once you have found a property you would like to purchase, a written offer must be prepared. An offer is usually recorded on a standard form called a CONTRACT OF PURCHASE AND SALE.
Your offer should include, at the very least, the following:
- Date of offer
- Expiry of the offer
- Full legal names
- Full legal property description Deposit amount
- Offer price
- Financing details
- Desired possession date
- Any conditions/subjects, which must be satisfied before the sale is finalized
- Lists of items included with sale of the property
- Your signature
When the seller receives your offer, they have three options:
1) Accept the Offer
If the Seller signs off on the contract exactly as written, this creates a legally binding contract.
2) Reject the Offer
The deal is dead as the seller does not want to negotiate. You may choose to submit a new offer.
3) Make a Counter-offer
If the seller changes anything at all on your original offer, the seller is considered to be making a counter-offer. When you receive a counter-offer, you then have the same three options as the seller had. The process of counter-offers may continue until an agreement is reached or one party decides to stop negotiating.
Important Contract Dates
The Contract of Purchase and Sale will detail a few very important dates:
Subject Removal Date
This is the date when the conditions or ‘subjects’ of your offer are removed and the deal is considered firm. Once the deal is firm, you are legally obligated to go ahead with the purchase. Failure to do so could have serious legal ramifications, which range from losing your deposit to being sued for specific performance (being forced to buy the home).
The BIG DAY – Here, legal ownership of the property will transfer from the old owner to you in exchange for the purchase price of the property. Congratulations, you are now a home owner! Hopefully you are almost packed and ready to move.
This is the date the lawyer or notary use when determining how to split the costs between the Buyer and Seller for things like property taxes, strata fees, etc. It is used to create a proportional ratio that is applied to expenses that have been paid in advance or that have been deferred for the future. The adjustment date is typically the same day as the Possession Date.
Moving Day! The possession date is typically 1-3 days after the Completion Date and is the day you get keys to your new home. Make sure you have some chilled champagne for the occasion. And, of course, we will be there to help celebrate!
Common Subject Clauses
Every contract will have subject clauses (also known as conditions) that allow the Buyer to do their due diligence before officially buying the property. These subjects clauses can vary depending on the type of property and the situation, but they typically include:
For any property:
A must – unless the building is brand new or you are intimately familiar with the building. If the inspection reveals something that will cost you money or makes you nervous about proceeding, you can either request that the Seller repair the defects or you can walk away from the contract. Upon occasion, the inspection will discover something that requires further investigation of a specialist.
Simply, this states that if you are unable to arrange purchase financing, you are not required to go ahead with the purchase.
Property Disclosure Statement
This document contains the Seller’s disclosure of everything he/she knows with respect to the property. If there are known defects, they must be disclosed here. If you do not approve of the disclosure, you can cancel the contract.
This document will outline the ownership of the property and describe any charges or liens on the property that will need to be discharged prior to transferring ownership. Any right-of-ways or restrictive covenants that may restrict the use or value of the property should be here as well.
The same subject clauses as above, but also including:
Again, a must. This will give you all the information you need to see what shape the Strata Corporation is in. This will include strata minutes, current financials, bylaws, rules and more. Pay attention to any reported maintenance issues, budget problems and any pet or rental restrictions.
Parking & Storage Assignment
There are a variety of ways that parking stalls and storage lockers can be assigned within a strata. It is important to determine how they are assigned as it may impact future use.
Many older homes in Vancouver had in-ground oil tanks. These can be both expensive and cumbersome to remove. A quick inspection can help determine whether an oil tank is present prior to subject removal. From there, it is possible to negotiate a resolution with the Seller.
If you are considering any re-development or major renovations, it will be important to check in with the City of Vancouver to verify what development is permissible and what is not. This will include whether or not you are able to add a legal suite.
Once we perform the necessary due diligence and you’re satisfied with the results, you remove subjects on the contract and the deal is official! Now we’ll just wait for the Completion and Possession dates and you’ll be a new home owner!
Again, this process is long, and involves a lot of different factors. It’s much better explained in person. Contact the LiveKitsilano Team to sit down to discuss the home buying process – we’re here to help!