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Understand the Paperwork When Selling Your Home

Jurisdiction: 
This information applies to British Columbia, Canada
Reviewed: 
November 2019
Time to read: 
7 minutes

Selling a home is a huge financial decision. What you do, or don’t, agree to now can impact your legal and financial obligations, even long after the sale’s complete. So it’s important to understand what you’re committing to. Here are some legal documents you might come across at different stages when selling your home.

Accepting an offer 

Giving buyers key information about the property

Closing the deal

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Selling a home is a huge financial decision. What you do, or don’t, agree to now can impact your legal and financial obligations, even long after the sale’s complete. So it’s important to understand what you’re committing to. Here are some legal documents you might come across at different stages when selling your home.

Accepting an offer 

The contract of purchase and sale

If you’re happy with an offer that a buyer makes on your home, you can accept it. In BC, an offer is typically made using a standard contract of purchase and sale. This is the key legal document in the sale of a home. It’s important that you understand your rights and obligations as a seller. You can do this by reading our explanation of the standard contract of purchase and sale

Once you accept an offer, the contract becomes legally binding. This means you can’t get out of your obligations without facing significant legal consequences.

Giving buyers key information about the property

1. Disclose key information in the property condition disclosure statement

The property condition disclosure statement provides information that’s of interest to buyers. For example, is the property connected to a sewer or septic system? You might hear this document referred to as a PDS. As a seller, you’re not legally required to complete a PDS. But it’s become standard practice in BC so most buyers will expect one.

Under the law, you must also tell potential buyers about any material latent defects you’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. This might include a history of flooding, structural damage to the property, or any work done without permits. 

As long as you’re honest about what you know, the law doesn’t require that what you say in the PDS be factually accurate. This provides you with some protection from claims if a buyer discovers problems with the property after the sale. But the protection doesn’t apply if you lied to the buyer, or misled them about the condition of the property. You also may not be protected if you should have known about the defect.

A buyer may ask if they can incorporate the PDS into the contract. If this happens, ask your realtor or lawyer to explain how this affects you. It may mean that you’ll have to pay damages if anything you say in the PDS isn’t true, even if you made an honest mistake.

2. You can make representations in the sale contract

The standard contract says that the seller isn’t making any representations or promises other than what’s written in the contract. This means that a buyer generally can’t rely on anything you or your realtor honestly say (orally) about the property. 

However, whatever you write in the contract about the state of the building or property (such as the state of the roof or electrical wiring) will bind you. Even after the sale is complete. 

If the buyer insists that you write any representations or warranties into the contract, ask yourself: Do I know this to be true with 100% certainty? If not, it may not be worth the risk.

Closing the deal

What's involved?

The final document review and 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 four 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 must fill out a document called a “Form A Transfer.” The form is prepared by the buyer’s lawyer or notary, but it’s signed by you as the seller. 

Once you sign the form, it must be sent back to the buyer’s lawyer for filing with the Land Title Office. The official record of ownership will be updated to reflect that someone else now owns the property.

2. Understand how much money you’ll receive with a “statement of adjustments”

A statement of adjustments is a document that lays out the financial obligations of the buyer and seller in a real estate transaction. Your statement of adjustment will be prepared by the buyer’s lawyer or notary.

The final line on the seller’s statement of adjustment tells you how much money you can expect to receive from the buyer on completion. The calculation starts with a credit for the purchase price. Adjustments are then made to increase or reduce the amount you’ll receive from the buyer. 

A “credit” is money you receive at closing. Typical credits include the following:

  • The purchase price (including funds obtained by the buyer through a mortgage).
  • Property taxes. Say you’ve already paid a bill for property taxes. A portion of that bill might relate to a time when the buyer will own and use the land. The adjustment recognizes that the buyer should pay you back for that amount of property tax.
  • Strata fees. Similarly, you might have prepaid monthly strata fees for the month that the buyer is moving in. 

A “debit” is something you must pay for at closing.Typical debit adjustments include the following:

  • Real estate commission to be paid to your realtor, and the buyer’s realtor.
  • Lawyer or notary fees.
  • Property taxes or other expenses that relate to a time when you owned the house, but which the buyer will be responsible for paying later. This usually happens when the sale occurs earlier in a billing period.
  • Any adjustments you agreed to make to the purchase price. For example, you might have agreed to compensate the seller for damage discovered during the home inspection.

3. Remove your old mortgage and other financial charges

Buyers want to know they’re getting a home that’s not burdened by other people’s debts. The standard contract requires you to remove financial charges such as mortgages and liens from the property. This is called “delivering clear title.” 

For example, some documents involved in removing a mortgage include the following:

  • A letter to your lender: Usually prepared by your lawyer or notary, this letter asks the lender for a payout statement. 
  • The payout statement: Tells you how much money you must pay the lender to “discharge” (get rid of) the mortgage. Once your lawyer or notary receives the proceeds from the sale of your home, they’ll pay the lender this amount. 

Your lawyer or notary will also make arrangements with your lender to remove the mortgage charge against title. Title is a record of property ownership. This is done by registering a “discharge” of the mortgage with the Land Title Office.

4. Tell your lawyer what to do with the sale proceeds with a “direction to pay”

If a lawyer or notary is helping you with the sale, they’ll ask you to sign an “irrevocable direction to pay.” This document tells them what to do with the sales proceeds. You’re authorizing them to pay part of the sales proceeds to people other than you.

The direction to pay shows how much money is coming in and going out. The main chunk of money coming in is the purchase price for the home.

Outgoing charges include money you need to pay to remove financial charges against the property. If you had a mortgage, this includes what you owe on the mortgage, plus any prepayment penalties.

Realtors' commissions and legal fees might also be included in the direction to pay. Compare the direction to pay with the statement of adjustments to make sure you’re not being “double charged” for anything. If you have any questions about the numbers, ask your lawyer or notary.

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Reviewed for legal accuracy by

Lawson Lundell LLP

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