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Canada - Buying Property
When looking to buy a property in Canada you will usually want to look for a local licensed estate agent who will find suitable properties for you, negotiate with the seller’s agent on your behalf and advise you on the terms and closing of the contract. Real estate agents who are members of real estate boards are automatically also members of the Canadian Real Estate Association and can call themselves Realtors. Most agents are realtors, and are held to a higher standard of ethics than regular agents and must also abide by a particular Code of Ethics.
Real estate agents take their fees in the form of commission on the sale of the house. This usually varies from 3-7% and is different around the country. In British Columbia and Alberta the typical rate is 7/3%, i.e. 7% on the first 100,000 and 3% on the remainder. In Ontario and Quebec for example the usual rate is 5%. The services of a realtor are free for the buyer.
Apart from visiting estate agency offices, properties can also be found on the internet, as there are many property websites such as www.rightmove.co.uk, which also feature properties in Canada, as well as real estate listing sites based in Canada such as www.remax.ca. You can also look on bulletin boards in local shops and cafes for adverts, check the classified section of newspapers, or simply walk around your local area looking for properties with ‘for sale’ signs.
The use of buyers’ agents is relatively new in Canada but common in the US. Buyers’ agents represent the buyer instead of the seller, and should provide an unbiased opinion on properties, as buyers’ agents aren’t selling properties on their own listings like real estate agents. They are generally paid a percentage of the sales commission paid to the listing Realtor. Buyers’ agents should also be licensed real estate agents.
If planning on staying in the country for 6 months or less per year you are considered a non-resident of Canada, but can still open a bank account and purchase property in the country. In most provinces there are no restrictions on foreign ownership of property, although in some places there may be a limit to the amount of land you are able to purchase. In Vancouver there is now a 15% additional tax for non-Canadian citizens and non-permanent residents, due to the huge rise in house prices there stemming from foreign, particularly Chinese, investment in the property market.
Once you have found a Realtor, obtained a mortgage and found your ideal property, you make an offer, and once accepted you put down the deposit. A written offer is made, and if you withdraw from the deal at this stage you may lose the deposit. Once the offer is made it is presented to the seller, and negotiations may follow on the price and chattels, i.e. the items that are included in the price (fixtures, carpets, appliances etc). The seller prints his initials on the changes and the document is returned to you for you to initial if you approve of the changes. The result is an Agreement of Purchase and Sale, which states the purchase price and deposit, which is then put in a trust account. Once both parties are content with the agreement they can set the closing day, or completion date, which is when the money will be exchanged and the lawyer’s fees paid. The keys can then be handed over.
For permanent residents and Canadian citizens, a mortgage can typically be obtained at 75% of the purchase price over a 25-year term. Non-residents can typically take out a 65% mortgage and have to pay 35% as a down payment. Qualifying for a mortgage depends on your credit rating, assets, income and savings. The estate agent can help you to look for a mortgage broker. After submitting the application, the relevant documentation approval usually takes one to two days. The documentation required typically includes proof of income, tax returns, ID and bank statements, among other things.
In order to prepare the mortgage documents the borrower may need to enlist the services of a lawyer. A real estate lawyer is also useful when negotiating and signing the deeds to the property. You can expect to pay around $1,500 in legal fees and disbursements by the end of the buying process. You can look for a suitable lawyer on sites such as www.canadian-lawyers.ca, or ask your real estate agent or acquaintances for contacts. You can also check with your provincial law society to find nearby lawyers as well as check the reputation of a prospective lawyer. It is best to look for a competitively-priced lawyer rather than a cheap one, as often price buys quality in complicated legal matters.
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