Buying a home is an exciting life event. But it can be overwhelming, especially for first-time buyers. Here are six things to consider. Think of them as tips to prevent legal problems. Full video transcript.
Buying a home can be exciting. But it's also stressful. There's a great deal at stake, strict deadlines in play, and a lot of paperwork involved. Here, we explain what you need to know up front, and walk you step-by-step through the process of buying a home in British Columbia.
What you should know
New homes vs. previously owned homes
While this information is aimed at buyers of previously owned homes, some of it will also be useful if you're buying a newly constructed homes. BC Housing offers a guide aimed at buyers of newly constructed homes.
If you're buying a strata
If you’re buying a condo, townhouse, or other strata housing, there are additional things you’ll need to consider. We flag specific considerations in buying a strata, in addition to what we cover here.
The money you’ll need
Before you start looking for a new home, consider what you can afford. This way, you won’t waste time looking for homes outside your price range. Be realistic. Consider your other financial goals, like saving for retirement, education costs and travel. Make room for unexpected job loss or illness.
The money you need now
No matter how you decide to finance your home purchase, you’ll be paying a large amount of your own cash right at the start. This will include:
The down payment. The portion of the purchase price you pay yourself.
Closing costs. The costs associated with buying a new home. Some typical closing costs include property transfer taxes, legal fees, and home inspection. The Real Estate Council of British Columbia has more information about closing costs.
Your ongoing costs
You don’t have to pay rent, but there are other ongoing costs you’ll need to budget for:
Monthly mortgage payments. Most people need to borrow a lot of money to cover the rest of the purchase price. You’ll pay the lender back (typically monthly), with interest. This arrangement is called a mortgage.
Other ongoing costs. When you’re renting, your landlord pays the costs of owning. As the homeowner, these costs will come out of your pocket. They include property taxes, home maintenance, home insurance, utilities, and strata fees (if you buy into strata housing).
Making an offer to purchase
If you find a home you want, you must make a written offer to buy it. Your offer should include the terms (such as the purchase price) on which you’re prepared to buy the property.
In BC, there’s a standard contract of purchase and sale. The buyer’s realtor will usually fill out this contract. It tells you what your rights are, what commitments you’re making, and the strict deadlines you must meet. We explain key things to know about the standard purchase contract.
Before you sign the offer, read it carefully. It may lead to a legally binding contract if the seller accepts your offer. Legally binding means you and the seller must each perform your obligations under the contract (or run the risk of being taken to court).
If you buy a home before it's built
If you buy a home before it’s built, you'll likely be asked to sign a pre-sale contract or a construction contract. These are different from the standard purchase contract.
You can add conditions to your offer
“We thought we’d found our dream home, at a price we could afford. We couldn’t believe our luck! Turns out there was a major drainage issue which would have been too expensive to fix. We’re so relieved the inspector flagged this issue. Including a subject clause helped us dodge a bullet.”
– Reggie, Langley
It’s common for a buyer to make an offer after viewing the home just once, especially when the market is hot. But how can you satisfy yourself that you’re not hit with a nasty surprise (or two) once you’ve handed over the cash? Adding conditions (or subject clauses) to your offer will buy you time to address these risks.
You can choose to walk away from the deal if you’re not satisfied that the conditions have been met by a certain date. This date is called the subject removal date. Usually, one week is plenty. But think about how much time you’ll need to satisfy your specific inquiries.
You can make your offer subject to:
Getting loan approval.
Being satisfied with the results of a home inspection.
Your lawyer’s approval of the agreement.
Selling your own home by a certain date, before you can buy the new one.
Checking zoning and title to the property.
Removing your subject clauses
The law says you must make all reasonable efforts to remove your subject clauses. For example, you can’t decline to remove your financing clause just because you’ve found a property you like better.
When you become locked into the contract
“House hunting was a crazy, sometimes deflating experience. We felt priced out of the market. So when we found a decent home that we could actually afford, we put in an offer to buy it. But we thought the offer was like an ‘expression of interest.’ The seller accepted our offer, and suddenly we were locked in! Soon, we were wondering if we were settling for something less than what we really want.”
– Jameela, Vancouver
There are different ways the seller can respond to your offer. They can:
Ignore your offer or reject your offer. If they do either of these things, you’re free to keep looking and to make offers to other sellers.
Cross out some of your terms and add new ones. If the seller changes your offer in any way, it becomes a new offer by the seller known as a counteroffer. For example, the seller might propose to increase the purchase price. The counteroffer cancels your original offer. You must then decide if you want to accept the counteroffer or make a counteroffer of your own to the seller. You don’t have to accept a counteroffer.
Accept your offer within the set time limit. To accept your offer, the seller must sign the contract without changing it. They must also tell you that they’ve accepted your offer.
The purchase contract is legally binding as soon as an offer or counteroffer is accepted in writing.
If you made an offer with subject clauses
What if you added subject clauses to your offer? Once the seller accepts your offer, they’re locked in — they can’t cancel the contract without consequences. As the buyer you’ve bought some time to thoroughly answer any questions you might have. If you can’t satisfy the subject clauses, you can walk away.
Hiring a lawyer or notary
Most buyers hire a lawyer or notary public to help close the deal. Their role is to deliver what you’re expecting, without surprises. Generally this means registering your name on title as the owner of the property clear of financial encumbrances.
Buying a home is a major expense and a complicated process. A good lawyer or notary public will walk you through. They’ll make sure you understand the paperwork. They’ll make sure things are done on time.
Using a lawyer or notary (and requiring the seller to use one) can help protect you from real estate fraud. For example, someone could pretend to be the true owner of a property and sign documents fraudulently. The seller’s lawyer or notary will check the seller’s identification to confirm their name matches the name registered on title.
Cost of hiring a lawyer or notary
You can expect to pay about $900 to $1,500 for a lawyer or notary for help with buying a home.
Step-by-step guide to buying a home
Step 1. Decide if you’re hiring a real estate agent
You can look for a home on your own or may decide to ask a professional to help you. As a buyer, you don’t pay your realtor. The seller typically pays a commission to both their own realtor and the buyer’s realtor from the sale proceeds.
There are advantages to working with a real estate agent. Realtors are connected to networks of potential sellers. They can help you navigate a complex process by:
helping you clarify the type of home you need and can afford
helping you make a written offer to purchase
explaining the steps to complete the purchase
explaining the forms used
When it comes to choosing a realtor, reputation matters. If you decide to use a realtor, ask for recommendations or look online. How well do they know your preferred neighbourhoods? Do they understand your lifestyle needs? Pick someone you trust and are comfortable with.
See if a realtor is licensed
Real estate agents must be licensed. You can use the licensee search from the Real Estate Council of BC to see if an agent is currently licensed.
Step 2. Look into mortgage options
It’s a good idea to get pre-approval for a mortgage before making an offer to purchase. Shop around to get the best terms. Our coverage of getting a mortgage has more on what to expect when you meet a lender or broker.
Making your offer subject to financing
While “pre-approval” is a good indication that you’ll get the loan you need, it’s not a sure thing. If you need to borrow money to complete the sale, consider making your offer “subject to” you securing satisfactory financing. You’ll be able to get out of the contract if the financing falls through.
Step 3. Make an offer
When you find a home you want to buy, make an offer to purchase. In most residential sales in BC, a realtor will help write up the offer on a standard contract of purchase and sale form. We have a deep-dive on the standard purchase contract. Here's an overview of what's involved.
Your offer should include the following items. These are all negotiable terms. The seller can choose to accept, reject or propose a change to any or all of them.
The purchase price. As the buyer, you set the purchase price you’re willing to pay. Choose a realtor who knows the local market. They can help you put in an offer that’s competitive, but not overpriced. Also, find out if you have to pay GST on top of the purchase price.
Time limit. Give the seller a time limit to accept your offer — normally a day or two. If the seller doesn’t accept it by then, your offer expires, allowing you to make an offer on another property.
Deposit. You’ll have to pay a deposit. The amount is typically 5% to 10% of the purchase price. The deposit should be paid to the realtor in trust, not directly to the seller. In most cases, you’ll want to keep it as low as possible.
When you pay the deposit
You pay the deposit once your offer is accepted. If you added conditions (subject clauses) to your offer, you pay the deposit once you’ve satisfied (or waived) the conditions.
Your desired completion date and possession date. The completion date is the day the home officially becomes yours. It's also when you'll need to pay the balance of the purchase price. The possession date is when you can legally take physical possession of the home. Usually, it’s the date you get the keys to your new home.
List of fixtures. When someone sells a home, all the fixtures go along with it. A fixture is anything that’s attached to the home such that removing it would cause damage or require repair. The bathroom sink is an obvious example. Specifically list in the offer anything you want the seller to include in the sale, such as appliances, curtains, mirrors or chandeliers. Add a sentence that the purchase price includes these items.
Include any subject clauses for conditions that are important to you. It’s risky to make an offer with no conditions.
Before you sign the offer, read it carefully. Remember, it may lead to a legally binding contract! If there’s anything in it you don’t like or that doesn’t apply, you can change it. If you’re making major changes, consider getting legal advice before you sign.
If you're thinking of making an offer
About to make an offer on a home? Using our home buyer's checklist will help flag key things to know before signing the contract of purchase and sale.
Step 4. Remove any subject clauses
Typically, buyers ask for a week to remove subjects, but you can ask for a longer time frame. Once agreed upon, it’s a strict deadline. To avoid scrambling, get on top of things straight away.
Here are some steps you might take to remove some common subjects:
Obtain loan approval. Let your lender know you’ve made an offer to purchase. Most lenders require an appraisal of the home before they commit to the mortgage.
Complete a home inspection. Make time to attend and take notes. If the inspection turns up any problems, you can ask the seller to fix them or to reduce the purchase price. Consumer Protection BC has more on what to expect from a home inspection.
If you don’t remove the subject clauses, the contract ends. On the other hand, if you’re satisfied that the conditions have been met, give written notice to the seller that you’re removing the conditions.
More on subject clauses
Learn more about the documents you may come across when you’re trying to satisfy the conditions of sale (that is, your subject clauses).
After the subjects are removed
Here are some things that should happen shortly after the subjects are removed:
Give the seller the deposit to secure the sale.
Arrange for “all risk” insurance coverage from 12:01 am on the completion date onwards. Most lenders require proof of insurance before they’ll provide any funds for the sale.
Find a lawyer or notary and let them know the deal is firm.
Step 5. Prepare the transfer paperwork
Typically, you’ll touch base with your lawyer or notary well before the completion date. Then, you’ll meet with them again on, or a few days before, the completion date to sign the closing documents. Don’t be afraid to ask questions. It’s important you understand each document you’re signing. We walk you through the common documents a buyer signs when closing a deal.
It’s your lawyer or notary’s job to make sure you understand the process. Here are some other things you can expect them to do (and explain to you):
Ask how you wish to hold title to the property. You can hold the property in joint tenancy or tenancy-in-common.
Examine title. They'll be looking for any charges against the property that reduce its value, or restrict the property’s use.
Coordinate payments. Your lawyer or notary will tell you how much money you must pay on closing. They'll also arrange to forward this money to the seller’s lawyer or notary.
The logistics of paying
Bring a certified cheque or banker’s draft for the amount of your closing balance. Just because money is sitting in a bank account under your name that doesn’t mean that you’ll have immediate access to it. Well before closing, check in with your financial institution to ask how much lead time they’ll need.
Deal with your lender. If you have a mortgage, your lawyer or notary will receive instructions from your lender. They’ll make sure any documents your lender requires are in place. They should also explain the terms of your mortgage to you.
Prepare the transfer documents. Your lawyer or notary prepares the transfer documents and sends them to the seller’s lawyer or notary. The seller signs the documents and returns them.
Register you as the owner. Your lawyer or notary will register the transfer documents and the mortgage with the land title office.
Step 6. Complete the sale
When your lawyer or notary has received all of the purchase money — and the land title office has confirmed the registration of the transfer documents — they pass the money to the seller.
Your realtor will give you the keys to your new home on the possession date. Remember to set up hydro, telephone and internet accounts.
Enjoy your new home!
What if I change my mind after making an offer?
It may be possible to revoke (that is, cancel) the offer. Revoking an offer can lead to legal problems. You’ll probably lose your deposit. The seller may also seek other legal remedies. It’s critical to ask for legal advice as soon as possible. A lawyer can help you minimize negative outcomes.
Remember, if you made an offer with subjects, you may still have time to get out of the contract — without consequences.
What are my rights and obligations if I’m buying a property that currently has tenants?
You must honour the existing tenancy agreement. You can only end it by following the same eviction rules that the previous landlord (the seller) would have had to follow. The Tenant Resource & Advisory Centre has more on your rights and obligations in this situation.
What’s the difference between a home inspection and a home appraisal?
Buyers often get home inspections to check the physical condition of the property. Lenders will typically get an appraisal to assess the property’s current market value.