It is always important to know the entire procedure from the start of putting in an offer till the day you take over the house especially when you are a first time home buyer.
This is how it normally flows when you are buying a property here in Vancouver.
1. Mortgage Pre-approval: I ask the client to get pre-approval from the bank so he/she knows what is the exact budget we are working with. It is also a very good bargaining tool for a buyer to have a pre-approved mortgage since Sellers love the fact that financing isn't an issue.
2. Presenting An Offer: When you have serious interest in a property, that's when you decide to put in an offer. We would look at the comparables to make a good decision of how much you should be paying for the property of interest (Comparables of Recently Sold would be a good indicator. Prices are dictated by the market! As your Realtor, I will be the one who will present the offer for you, it is my job to negotiate the Best Price, the Best package for my clients.
Normally the last 6 - 10 months of sales would be a good indication, anything too far back could be obsolete. Sellers can ask for whatever they want or dream of getting but eventually the market dictates!
Once you’ve put in an offer, the Seller can counter, ignore or accept.
In any contract of Purchase of Sales, I suggest a client to put these Subjects & of course anything else you require the Seller to fulfill depending on your situation & the house:
1. Subject to going over and approving Strata documents of the last 24 months. (for Strata only)
2. Subject to Financing.
3. Subject to Home Inspection & Approving the Inspection Report.
4. Subject to getting and approving the Property Disclosure Statement which forms part of the contract. That is what the Seller knows about the property i.e. any defects, leaks or any Latent Defects etc.
5. Subject to Title Search. We need to make sure the Title is clean or doesn’t contain Easement that could affect the value of your property.
A normal time for subject removal by the Buyer is from 5 - 7 working days.
When you have an Accepted Offer that’s when we would work on Removing your Subjects.
3. Deposit: Once the Subjects have been removed by the Buyer, usually within 24 hours, a deposit of 5% of the purchase price (which is the norm) has to be paid in bank draft by the Buyer, payable to the Buyer's Real Estate agent’s company In Trust. For a 2 million property, a 5% deposit would be $100,000- this deposit of course forms part of the purchase price.
4. Completion Date is the date you and the mortgage bank pay the Seller & the date the Title of the Property is transferred from the Seller to you, the Buyer. (Completion is usually around 60 - 75 days from Subject Removal Date, it could vary depending on what is agreed upon both parties.)
5. Possession Date is the date you take over the property usually is a day or two after Completion Date.
If you end up with an accepted offer of $2,000,000 - meaning you have agreed to buy the property for $2,000,000 on January 5th, 2014.
You have Subjects and Subject Removal Date is January 14th, 2014 and on the contract it says Deposit to be paid 24 hours after Subjects Removal.
24 hours after Subjects Removal, that is January 15th, 2014, you must pay a 5% deposit which would be $100,000 in bank draft.
Completion: That’s the date the Seller gets the money and the Buyer gets the Title to the Property. The bank will pay the mortgage amount to the Seller through the use of a lawyer or Notary Public. Your Down Payment if it’s 35% would be ($700,000 – Deposit of $100,000).
Lawyer fee can vary from a few hundred dollar to around $1,000 for a simple transaction. The bank could charge you a small fee of one to two hundred dollar for setting up a mortgage.
Inspection fee: Depending on the size of the house: $400 – $700 (unless over 50x120 lot)
The biggest chunk would be the Property Transfer Tax which is payable by the Buyer. 1% of the first 200,000 and 2% on balance. I’m often shocked to hear that Buyers are not informed of this cost because it could be a very unpleasant surprise! For example: you are buying a property at $2,000,000, you are paying the government $38,000 to transfer the title.
As for Realtor's Fee? The Seller pays :-)
So at $2,000,000 purchase price, your actual expense would be close to $2,040,000-
I always want a client to know beforehand so there’s no hidden surprises!
This information is prepared by Henrietta Tan and I hope this information is helpful to you. I am a very detailed Realtor and I do believe I’m the Best Agent to help you with your home purchase.