Buying a home can be stressful. And the amount of paperwork involved can be overwhelming. But it’s important to understand what you’re committing to when you sign legal documents. This can ensure you’ll meet strict deadlines, avoid surprises, and can enforce your legal rights. Here are some documents you'll come across at different stages of the home buying process.
Making an offer
Understand what you’re signing up for
If you find a home you want to buy, the next step is to make a written offer to the seller. In BC, this is typically done using a standard contract of purchase and sale.
The purchase contract sets out the rights and obligations of both the buyer and the seller. It says who must do what, and by when. Before you sign the offer, read the contract 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).
Learn more about your rights and obligations under a standard purchase contract.
If you’re about to make an offer on a home, take a look at our online checklist for new home buyers. It alerts you to some important things you should know before signing the contract of purchase and sale. And it only takes five minutes!
What the seller says
The standard contract says that the seller isn’t making any promises other than what’s written in the contract. This means you generally can’t rely on anything that’s said about the property if it’s not written in the contract.
Satisfying the conditions of sale
You can attach conditions to your offer. This buys you time to decide whether you want to go through with the sale. If you can’t satisfy the conditions, you can walk away. Here are three documents you may come across during this period.
1. Property condition disclosure statement
The property condition disclosure statement provides information that’s of interest to potential buyers. It’s usually referred to as a PDS.
Sellers aren’t legally required to complete a PDS. But it’s become standard practice in BC. If your realtor doesn’t mention it, ask them to request one. The seller should include key information about the property that a potential buyer would want to know. For example, is the property connected to a municipal sewer or on a septic system?
Under the law, a seller must tell a buyer about any material latent defects they’re aware of. Sellers usually do this by filling out a PDS. A material latent defect is a problem that can’t be detected by a reasonable inspection of the property. Common examples include:
- a history of flooding or insect infestation
- structural damage to the property
- underground storage tanks located on the property
- problems with the drinking water
Take what the seller says in the PDS with a grain of salt. As long as a seller is honest, the law doesn’t require that what they’re telling you in the PDS is correct. If you want to know something about the state of the property, look into it independently.
As well, you cannot rely on anything the seller or their realtor only says orally.
Consider incorporating the statements made in the PDS into the purchase contract. That way, the seller is bound by anything they say in the PDS.
Say a seller honestly believes there’s no termite problem, and they say so in the PDS. After the sale completes, you discover that there actually was an existing termite problem.
Normally, the seller’s honest disclosure would get them off the hook. But, if the PDS formed part of the contract, you could sue for damages. Ask your realtor or lawyer about wording you can use to incorporate the PDS into the contract.
2. Home inspection report
Most buyers get a home inspection before committing to the purchase. Having an expert check the home is the best way to get an honest and informed opinion about its condition. An inspector will visually examine the property and provide you with a home inspection report. They check a building’s systems and structural components such as electrical, plumbing, structure, insulation and ventilation.
Take the time to read the report carefully. Expect a lot of detail — the reports are designed to be comprehensive. All homes have problems, even relatively new ones. Some problems are significant, and others are no big deal. When reading the report, focus on the problems that would make the home unlivable, or would be expensive to repair.
Make time to attend the inspection, so you can hear everything first-hand and ask questions. There’s no substitute for seeing the issues for yourself.
A home inspection can’t guarantee that you’ll uncover every problem. The report must list areas that were not covered by the inspection. For example, an inspector can’t comment on spaces that aren’t reasonably accessible or visible. This means they might not be able to tell you if there’s a defect behind walls, underneath floors, or in an attic. They’re also not required to inspect any evidence of water penetration, condensation and mould.
3. Title search
Having “title” to land simply means that you will be legally recognized as owning it. The Land Title Office keeps an official record of who owns what land in BC. It also keeps a record of any encumbrances that might be registered against the property. These are charges that may restrict how the property can be used, or reduce its value, such as mortgages or easements.
Before you commit to buying a home, you should satisfy yourself that you’ll be able to use the property as you intend. This includes finding out about any restrictions on its use.
A title search shows who the owner of the home is, and any related encumbrances. Any existing financial charges (such as a mortgage) must be removed by the seller as part of the sale.
A title search may also reveal non-financial charges against the property that restrict how the land can be used. For example, you might not be allowed to build multi-unit dwellings on the land. Under the standard contract, a seller isn’t required to remove these non-financial charges from the property. The restrictions come with the property.
It’s common for the buyer’s realtor to obtain a title search during the subject removal period. If anything unusual comes up, your realtor should tell you to talk to a lawyer. Once the deal is firm, your lawyer or notary will also do a title search.
Closing the deal
The final document signing usually takes place at the office of your lawyer or notary. This happens on, or a few days before, the “completion date.” Here are six common documents your lawyer or notary might get you to review or sign.
1. Transfer ownership with a “Form A Transfer”
When someone sells their home in BC, they have to fill out a document called a Form A Transfer. This is filed with the Land Title Office. Then the official record is updated to reflect that you’re the new owner of the property.
This form is typically prepared by the buyer’s lawyer or notary, but it’s signed by the seller. As the buyer, you should check that:
- Your name is spelled correctly. The form should show your full legal name. Ask your lawyer or notary what to do if this name differs from the name that appears on your purchase contract.
- The form correctly indicates the way you want to hold the land (in joint tenancy or tenancy-in-common). If you’re unsure, ask your lawyer or notary to explain the difference to you.
- Your address is correct. If you’re moving into your new home, use your new address. This is how you’ll receive important mail related to the property, such as property tax assessments.
2. File taxes with a property transfer tax return
When you buy property, you’re responsible for filing a property transfer tax return with the Land Title Office. You’ll also have to pay any related property transfer taxes. If you don’t do this on time, the Land Title Office may refuse to register you as the new owner of the property.
Typically, the buyer’s lawyer or notary completes the return. They’ll ask you to sign it. They should also tell you how much tax you need to pay. Generally, you give this amount to your lawyer or notary, and they’ll pay it to the Land Title Office on your behalf.
There are some exemptions. Your lawyer or notary can help you figure out whether you need to pay property transfer tax.
3. Calculate how much you owe with a “statement of adjustments”
A statement of adjustments is a document that lays out the financial obligations of the buyer and seller.
The final line on your statement of adjustments tells you how much you must pay to complete the transaction. The calculation starts with a debit for the purchase price. Adjustments are then made to increase or reduce the amount you still owe (to the seller or to others).
A “debit” is something you must pay for when you close. Debits increase the total amount of money you must pay. Typical debit adjustments include the following:
- Property transfer tax, goods and services tax (GST) if it applies, lawyer or notary fees.
- Property taxes. A seller might have already paid an annual bill for property taxes. Some of those taxes might relate to a time when you will own and use the land. The adjustment recognizes that you must pay the seller back for that amount of property tax.
- Strata fees. Similarly, a seller might have prepaid monthly strata fees for the month you’re moving in.
- Title insurance. This insurance protects your lender from problems related to the property’s title. You can also purchase your own title insurance at the same time.
A “credit” is money you’ve already paid to the seller (for example, a deposit), or you’ve paid or will pay to a third party on behalf of the seller. A credit reduces the amount of money you must pay on closing. Some typical credit adjustments include the following:
- The deposit. This is a credit because you've already paid this amount of the purchase price to the seller.
- Any amounts you're borrowing that your lender will pay on your behalf. The mortgage reduces the amount of the purchase price that you have to pay out of your own pocket.
- Property taxes, strata fees, or utility expenses. You might receive the bill for expenses that relate to a time when the seller owned the home. Adjustments should be made for these.
Your lawyer or notary should alert you to any upcoming property tax bills. Make sure to budget for the payment.
4. Get financing with a “mortgage loan agreement”
If you’re borrowing money to buy your home, you should have already met with your lender (or a mortgage broker) to negotiate the terms of your mortgage. At closing, you’ll need to sign the mortgage loan agreement. This is the agreement between you and your lender that sets out the terms and conditions of the mortgage.
Your lawyer or notary should clearly explain the terms of the mortgage to you. Make sure you understand the fees, type of loan, interest rate, payment amount and schedule. Are they what you were expecting? Make note of when your first mortgage payment is due.
Learn more about getting a mortgage.
Getting mortgage pre-approval doesn’t guarantee you’ll get the loan. It's the mortgage loan agreement that locks your lender into the arrangement.
5. Authorize the payment of money with a “direction to pay”
A direction to pay contains your instructions for what to do with the mortgage money. Your lawyer or notary will prepare this document for you, but you’ll be asked to sign off on it. You may instruct:
- your lender to pay the mortgage amount to your lawyer or notary
- your lawyer or notary to allocate the mortgage money to different parties (for example, to the seller, to taxing authorities, or to pay legal fees)
6. Register the mortgage with a “Form B Mortgage”
Under the law in BC, a mortgage gives the lender a “charge” — meaning an interest or a right — against the property. That charge gives the lender rights if you default on the mortgage. For example, if a borrower doesn’t make their payments on time, the lender can sell the property to pay the debt.
Form B Mortgage is a document that’s filed with the Land Title Office. It tells the Land Title Office about the lender’s rights against your property. The form also provides key details about the mortgage, such as its amount, amount, the interest rate and the loan period. You’ll be asked to sign this form.
You’ll also be asked to sign a document acknowledging you received copies of:
- the Form B Mortgage, and
- the standard mortgage terms.