WHAT IS A SUBJECT?
Subjects are essentially conditions that must be met in order for the deal to become firm, or official. These subjects might include: subject to financing, inspection, property disclosure statement, title search, or strata documents – to name a few. They are completed during the subject removal period, which is the time that you actively work to remove these subjects in good faith.
For more details on the types of subjects and clauses used in a contract, check out this blog: Real Estate Clauses for Contracts
WHAT IS THE SUBJECT REMOVAL PROCESS AND HOW LONG DOES IT LAST?
The subject removal period works as a great safety net. It includes “subjects” which are essentially conditions that must be met in order for the deal to become official. These subjects might include: subject to financing, inspection, property disclosure statement, title search, or strata documents – to name a few. These are listed in the terms and conditions section of the contract of purchase and sale. Subject removal period is typically 7 days long (i.e. if you put an offer in Monday, subject removal would be due by the following Monday) and allows you to organize all of your affairs, such as making sure your financing is in place and an inspection on the property or building has been done. The most important factor to consider in the subject removal process is TIME, and the banks, inspectors, and/or property management companies likely aren’t open on weekends or STAT holidays. By putting them in a time crunch, you risk not being able to remove subjects and the whole deal collapsing. With that in mind, if you are presenting an offer and the 7 day S/R time falls on a weekend or a STAT holiday, try to negotiate for a longer subject removal date – even if it’s by a day or two!
For more details on subject removal, check out our blog post here: Subject Removal 101
IF I DON’T REMOVE SUBJECTS DO I LOSE MY DEPOSIT MONEY?
The deposit is there as collateral to compensate the seller in the case that the buyer does not complete the deal. So the usual question is: when do I have to hand in the deposit and if I don’t remove subjects do I lose any money? The answer lies in how the contract is structured. Typically, if there is a subject removal process the deposit will be due either upon subject removal or within 24 hours after you have removed subjects. This means that if you back out of the deal during subject removal because you couldn’t obtain adequate financing (ex.) then you would not lose any money as you would not have handed in your deposit. If you choose to remove subjects, you then hand in your deposit, and the deal now becomes “firm” and wait until the completion & possession date. The only case where you would likely lose your deposit (and more likely be sued) is if you back out of the deal once it is already firm. In the Tri-Cities and Greater Vancouver, the deposit is usually 5% of the purchase price and will be held in trust by the buyer’s agent’s brokerage. This deposit will then form a part of your down payment.
WHAT IS THE COMPLETION, POSSESSION, AND ADJUSTMENT DATE?
The completion date is the day that the money for the purchase is paid by the buyer to the seller and the buyer gains title of the home.
The possession date is the day you move in and the adjustment date is the date that calculations for such items as property taxes, water accounts, rents, damage deposits, etc. are modified.
In Greater Vancouver, the possession and the adjustment date are typically the same day, with the completion day being at least 1 day earlier. This recommendation is made to avoid a situation where circumstances may cause a delay in the completion of the purchase and the Buyer has no place to move to.
WHEN IS THE BEST TIME TO BUY?
That’s a tough question. Real estate in Greater Vancouver is seasonal, with the slowest times being November, December, & January. The market always picks up again in the spring by March. More inventory = more selection, so if you’re picky (and that’s OK… we are too!) then March-September might be a better market for you to shop. However, more inventory also means more buyers in the market (as the home sellers usually need to purchase a home as well). You may be dealing with more multiple offer scenarios and competition, especially if the type of home you’re looking for is “desirable” to many. With that being said, it’s not always about the seasons. At any given time, prices or interest rates may go down, and even if it’s November that could mean that you may receive a better deal! In our opinion, with buying, it’s more about the market, prices, and rates than it is about the seasons. It’s best to discuss timing and strategy with an experienced real estate professional.
I’M A FIRST TIME HOME BUYER - AM I ELIGIBLE FOR ANY PROGRAMS TO HELP WITH CLOSING COSTS?
Yes, as a first time home buyer you may be eligible to have an exemption of the property transfer tax. There are partial exemptions, but to qualify for a full exemption you must:
- be a Canadian citizenor permanent resident;
- have lived in BC for 12 consecutive months before the date the property is registered; or
- have filed 2 income tax returns as a BC resident in the last 6 years;
- have never owned an interest in a principal residence anywhere, anytime; and
- have never received a first time home buyers’ exemption or refund.
- The property must be used as a principal residence and have a fair market value of $475,000 or less and be 0.5 hectares (1.24 acres) or smaller. There is a partial exemption for properties $475,000 – $500,000.
If you are a first time home buyer purchasing a new build home you may also have a GST rebate of 36% of the 5% GST for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000.
You may also want to check out our blog post on “Closing Costs 101.”
WHAT KIND OF CLOSING COSTS SHOULD I ANTICIPATE WHEN I BUY A HOME?
To name a few, you should take in to consideration an appraisal fee, home inspection fee, property transfer tax, GST for new build homes, legal fees, property insurance, pre-paid property tax and/or utility adjustments, maintenance fee adjustment (if it’s a strata home), moving expenses, mortgage and/or title insurance (optional), and a property survey. The type of home and when you buy the home will both affect the costs consider. To have a buyer’s cost sheet made out for you, contact your realtor. You may also want to check out our blog post on “Closing Costs 101.”
DO I NEED TO HIRE A LAWYER OR NOTARTY WHEN I BUY A HOME?
Yes. Each side, whether you are a buyer or a seller, will require a lawyer or notary as representation, production of the statement of adjustments, and facilitation from acceptance to closing.
DO I NEED TO PAY GST IF I PURCHASE A NEW BUILD HOME?
Yes. You will be subject to charge of a 5% GST on new build homes. If you are a first time home buyer, you may be eligible for a rebate of 36% of the 5% GST for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000
HOW MUCH IS PROPERTY TRANSFER TAX?
Without any exemption, the tax structure is charged on the fair market value of a property at the rates below:
- 1% on the first $200,000
- 2% on the balance up to and including $2,000,000
- 3% on the balance greater than $2,000,000
Effective August 2, 2016, an additional PTT charged at a rate of 15% of the fair market value applies to residential property transfers to foreign entites in Metro Vancouver or the Greater Vancouver Regional District. The additional tax applies on the foreign entity’s proportionate share of any applicable residential property transfer, even when the transaction may normally be exempt from the PTT.
WHAT IS A SUBJECT FREE DEAL? WHAT ARE THE CONSEQUENCES?
A subject free deal is when there are no subjects. The deal is firm as soon as the seller accepts it, and the deposit is due upon acceptance or within 24 hours (depending on how the contract is structured). The consequences of a subject free deal is that there is no safety net! One of the major concerns is financing. If the deal is accepted, and something pops up in the appraisal (i.e. they determine it’s over-valued) and the lender refuses to finance it, you could be in big trouble. In this case, either you’ll have to find a way to pay all cash for the home, or you’ll most likely be getting sued by the seller for not being able to complete & lose your deposit.
DO I PAY YOU A REAL ESTATE COMMISSION FEE WHEN I PURCHASE A HOME?
We can’t speak for everyone, but when you hire Bridgewell the buyer does not pay a commission. How is this possible? Because on the listing contract that the seller signs, there is a section that stipulates the gross commission. From that gross commission, there is a split for the buyer’s agent and the seller’s agent. Thus, the seller typically pays the buyer’s agent.
HOW MUCH IS A BANK APPRAISAL?
A bank appraisal is typically about $300-$450 plus GST, and is often covered by the lender.
WHAT HAPPENS IF I WAIVE THE FINANCING CONDITION AND THEN CAN’T GET FINANCING?
Bad things!! If the deal is firm and you’re past acceptance/just waiting until closing, most likely, it will end up 1 of 2 ways. 1) You will risk losing your deposit and probably be sued 2) You will have to come up with the purchase price in cash because you can’t qualify for a mortgage. As soon as you have an accepted offer and the subject removal process begins, the first and most important task is to notify your lender and make sure you’re approved for a mortgage before the subject removal date.
HOW MUCH DEPOSIT DO I NEED TO PUT DOWN?
The deposit amount varies, but a common amount in the Greater Vancouver real estate market is 5% of the purchase price. As a strategy, if you’re looking to have a bit of an upper hand and show motivation, some buyer’s offer to increase the deposit amount.
For more information on deposits, check out this blog: Deposits in Real Estate 101
HOW MUCH MONEY DO I NEED TO PUT DOWN?
The amount of money that you are required to put down depends on the amount that you are purchasing. Effective February 15, 2016, the minimum down payment for new mortgages is as follows:
- For homes with a purchase price less than or equal to $500,000 the minimum down payment is 5%
- For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes with a purchase price of $1 million or more, the minimum down payment is 20%
If you put less than 20% down, you are considered to be high-ratio mortgage and your lender will require that you get insurance through a company. (Commonly Canada Mortgage and Housing Corporation aka CMHC) In this case, you are required to pay a premium for this insurance, which your mortgage broker or bank can factor in to your monthly payment. If liquid cash is more important to you and you’re comfortable with the monthly mortgage payment, putting less than 20% down might be the best option for you! When determining how much to put down, ask your broker to give you the monthly payment scenarios for (ex.) 10% and 20% so you can make an educated decision.
CAN I GET OUT OF AN OFFER IF I HAVE A FINANCING CONDITION? DO I HAVE TO PROVE THAT I DIDN’T GET FINANCING?
This is a good question, and applies to other subjects as well. Again, the subjects/conditions are there to act as a safety net for you to do your due diligence and seek to obtain financing (or an inspection report, etc.) in good faith. Key words: due diligence & in good faith. Meaning, you have full means to back out of the offer if your reasoning relates to that which is outlined in the contract as a subject. The conditions are not there for you to simply change your mind and allow yourself time to sleep on it, only to back out of the deal the next day stating that you couldn’t get financing when you haven’t even spoken to a lender yet. With that being said, whether or not you have to provide proof largely depends on the wording that your realtor used. While some realtors state that as long as a mortgage is offered with XXX term and XXX interest rate, we usually use a clause that states that the financing must be “satisfactory and approved by the buyer in their sole discretion.” When a clause is written the way we write it, it ultimately means that you have the final say on what is satisfactory, and even if someone has agreed to give you a mortgage it doesn’t mean that you have to accept it.
IS PRE-APPROVAL REALLY A BIG DEAL? SHOULD I GET IT?
Yes, it is a big deal – and in more ways than one. The mortgage broker who performs your pre-approval is there to look at your income, look at your assets/debts, determine your liquid cash and how much or how little you can put as a down payment, and then give you a better idea of what you can afford. Shopping for a home with no expectations or goals in mind is no different than going to a grocery store without a list or budget. You may spend 6 months looking at luxury homes when you find out you can only afford a $300,000 condo! Not only will you end up extremely disappointed, but you’ll also end up wasting your own time. By having a strong grasp on the style of home, size of home, neighbourhood, market prices, and what you can afford you will save a ton of time and ensure that you’re purchasing a home that you can afford comfortably and realistically.
Furthermore, pre-approval works as negotiation power when you put in an offer. If you’re able to have your lender or mortgage broker write a letter signing off on your ability to obtain financing, the sellers will feel more comfortable with your offer. There’s been a number of times where we’ve won with a lower asking price solely because the sellers were more confident in our client’s financing! Pre-approval will save you time during your home search, and possibly money at the time of offers. If you’re looking for a mortgage broker, see our list of “People We Trust.”
CAN I JUST BUY THE HOME WITH THE LISTING AGENT? DO I REALLY NEED A BUYER’S AGENT?
You can buy your home with the listing agent, but it’s probably not the best idea. Think about it this way… the seller’s goal is to get the highest price, but the buyer’s goal is to get the lowest price. How can you have one agent working in both of your best interests, when the goals of each client are on complete opposite sides of the spectrum!? It’s practically impossible. If you do choose to work with the listing agent, and have them “double end the deal” as we say in real estate lingo, you’ll most likely be put under a customer relationship, and they won’t have to uphold the same duties to you as if you were under a client relationship. To make sure you’re in the best situation for yourself, and the most protected – hire a buyer’s agent to represent you and only you. Are you interested in more information about what the buyer’s agent does?
See our post on “What Does the Buyer’s Agent Do?”
IS THERE A NORMAL AMOUNT OF DAYS TO CLOSE?
There is no normal number of days, per se. However, we find that most buyers and sellers are comfortable with a 45-60 day close. We frequently see anywhere between a 30-90 day close depending on the seller or buyers situation. That being said, we’ve seen as quick as 2 week close and as long as 9 month close! It really is situational, and is something that is negotiated between the seller and the buyer.
“Mariko is one of the most hardworking and motivated people I know. Starting out as a first time home buyer can be tough, but Mariko’s seller and buyer guides have made the process understandable, comfortable, and easy. I have never seen this offered by another realtor before. When I am in the market for a new home, I will definitely be coming to Mariko for help!”
“…you have been so patient and helpful throughout this process. A big thanks to both [Mariko & Radner] for all of your support! You went above and beyond what was expected and I will happily refer to you all of my friends and family that are looking to buy or sell in the future.”
“You are the best realtor ever. You pay attention to detail, always communicate, and I never had to worry about you missing anything, not even once. I will definitely be using you when I make my next move to a detached home! Thank you so much.”
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