Working with a Real Estate Agent... 

Buying or selling a home is probably the most important and potentially rewarding financial transaction you'll make in your life. So it's a good idea to take a moment and consider the kind of relationship you might be entering into with a REALTOR. The more you know, the more satisfied you'll be with the results.

The information contained has been designed to explain various types of agency relationships and to help you understand what it all means. If you are still unclear about these concepts, feel free to seek legal counsel.

REALTORS work within a legal relationship called agency. The agency relationship exists between you, the principal, and your agent, the company under which the individual salesperson, who is representing you, is licensed. The essence of the agency relationship is that the agent has the authority to represent the principal in dealings with others.

Agents and their salespeople are legally obligated to protect and promote the interests of their principals as they would their own. Specifically, the agent has the following duties:

1. Undivided loyalty. The agent must protect the principal's negotiating position at all times, and disclose all known facts which may affect or influence the principal's decision. 

2. To obey all lawful instructions of the principal. 

3. An obligation to keep the confidences of the principal. 

4. The exercise of reasonable care and skill in performing all assigned duties.

5. The duty to account for all money and property placed in an agent's hands while acting for the principal. 

6. You can expect competent service from your agent, knowing that the company is bound by ethics and the law to be honest and thorough in representing a property listed for sale.

You may also choose to use the services of a REALTOR without having any kind of agency relationship. This might occur, for example, when you are being shown a property by the seller's agent. The REALTOR you choose to work with in this manner has a legal and ethical duty to provide you with accurate, honest answers to your questions and can provide all these services:

· Explain real estate terms and practices 
· Provide and explain forms used 
· Assist you in screening and viewing properties 
· Inform you of lenders and their policies
· Identify and estimate costs involved in a transaction 
· Assist you in establishing your range of affordability 
· Prepare offers or counter-offers at your direction 
· Present all offers promptly 

A REALTOR who is not your agent cannot: 
· Recommend or suggest a price 
· Negotiate on your behalf 
· Inform you of his/her principal's top/bottom line 
· Disclose any confidential information about his/her principal unless otherwise authorized You should not provide a REALTOR who is not your agent with any information that you would not provide directly to his or her principal.

Dual agency occurs when a real estate agent is representing both the buyer and the seller in the same transaction. Since the agent has promised a duty of confidentiality, loyalty and full disclosure to both parties simultaneously, it is necessary to limit these duties in this situation, if both parties consent.

If you find yourself involved in a dual agency relationship, before making or receiving an offer both you and the other party will be asked to consent in writing to this new limited agency relationship. This relationship involves the following limitations:

i) The Agent will deal with the Buyer and the Seller impartially

ii) The Agent will have a duty of disclosure to both the buyer and the seller except that...

iii) The agent will disclose to the buyer defects about the physical condition of the Property known to the agent.

Financing... 

Basically, there are two criteria for financing a home....

First, housing costs including the mortgage payment, taxes, utilities and strata fees cannot exceed 32% of your gross income. If you have no other debt, an exception can be made up to 35%. Total debt servicing, including all other loans and credit payments cannot exceed 40% of your gross income.

Secondly, in a conventional mortgage, a down payment of 25% is required. The exceptions to this are high ratio, insured mortgages that are available for your primary residence with a minimum of 5% down payment. The insurance cost increases as the percentage of financing requested increases.

With higher valued properties, lending values decrease as the value of the property increases.

In other words, for a property valued at or below $500,000, the conventional down payment of 25% is required. 

For the next $250,000, the down payment amount is 40%.

For the next $250,000, 45%, and then 50% of the remainder.

For example, with a purchase price of $800,000, the maximum mortgage allowed is $552,500. This applies to Canadian residents only, either owner occupied or investment properties. 

For non-residents, the required down payments are slightly different.

For the first $400,000, a down payment of 35% is required.

For the next $300,000, a down payment of 45% is required, Then 50% for the remainder.

For example, if the purchase price is $800,000 the maximum mortgage allowed is $475,000.

It should be noted that lending policies at Canadian institutions vary from institution to institution, period to period, person to person and from property to property. If you are interested in the exact situation that addresses the property you are considering, please contact us and we will refer you to the appropriate person.

HST & PTT... 

This is a Provincial Government Tax that applies to all transfers of real estate, new or old, and is payable on the completion date. The rate of the tax is 1% on the first $200,000 of the purchase price and 2% on the balance.

HST is payable on the purchase price of newly constructed or substantially renovated residential homes. Substantially renovated is defined in the legislation as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase.

If the Purchaser (or a certain related family member) is planning to reside in the new home as their primary place of residence, there are, depending on the purchase price, two rebates that may be available.

The first rebate is the GST New Housing Rebate, which existed prior to HST being introduced. This rebate is available to recover some of the 5% that is charged for GST and equals 36% of the GST portion of the price.

For example, assume the purchase price of a new home is $350,000 excluding HST. The 5% federal portion of the HST (the "old GST") is $17,500. The GST New Housing Rebate is 36% of $17,500, which is $6,300. The net federal portion of the HST payable is then $17,500 less $6,300, which equals $11,200. This is exactly the same as under the GST rules.

The full GST New Housing Rebate is available for new homes priced up to $350,000. For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula:  $6,300 x [$450,000 - the purchase price] / $100,000

For example, assume the purchase price of a new home is $400,000 excluding HST. The partial GST Rebate is $6,300 x [$450,000 - $400,000] / $100,000 which equals $3,150. The federal portion of the HST would be 5% of $400,000, which equals $20,000, less the partial GST New Housing Rebate of $3,150, for a net tax of $16,850.

There is no GST New Housing Rebate on homes valued at over $450,000.

The second rebate is a B.C. New Housing Rebate available to recover some of the 7% provincial portion of the HST. The B.C. New Housing Rebate is 71.43% of the 7% provincial component of the HST paid, up to a maximum of $26,250. The maximum flat rebate of $26,250 applies to new homes priced at $525,000 and above. The conditions for claiming the B.C. New Housing Rebate mirrors the conditions for claiming the GST. New Housing Rebate except that the B.C. New Housing Rebate is applicable to all qualifying properties rather than just those properties under $450,000.

For more information on HST see www.rev.gov.BC.ca or www.cra-arc.gc.ca/gncy/hrmnztn

Generally there is no HST on the purchase price of used residential property but in some cases, a seller could be a company and they may have deferred the HST on the original purchase. If the seller is a company, HST could be payable on the re-sale.

Non-Resident Fees... 

Non-Resident Fees When Purchasing...

We frequently handle transactions from the United States or overseas. Buying a home is a simple, hassle free process. We are able to put you in contact with lawyers and mortgage lenders to make the transaction as easy as possible. The following are a few details you should be aware of...

Withholding Tax on Rental Income: The 25% withholding tax can be reduced in certain circumstances. The NR6 form for reducing non-resident withholdings requires an agent in Canada that will assume full responsibility for paying the taxes if the non-resident doesn't pay. Many rental agencies will not accept NR6 forms because they would be responsible if the non-resident doesn't pay.  Please check with your accountant or CCRA.

Execution of Mortgage Documents: Once the borrower has signed a commitment letter with the lender, the lender will instruct a lawyer or notary to draw the mortgage security. These documents must be couriered to the borrower for their execution in the presence of a notary public. What this means to the buyer is simply that sufficient time be allowed to courier the documents as faxes or other methods of transmission are not possible in this case.

Methods of Payment: It is recommended that the purchaser open a bank account in Vernon for the transfer of funds. The balance of the purchase price must be paid by certified cheque or bank draft in Canadian funds. Since exchange rates fluctuate from institution to institution, from day to day, and depending on the amount to be exchanged, it is important to research this before the completion date.

Completing the Transaction: It is critical to complete transactions on the designated completion date in British Columbia. The seller has the option of canceling the contract of Purchase and Sale should the funds not be paid on the stipulated completion date, and is entitled to retain the deposit. It is not uncommon for sellers who wish to continue with the transaction to demand interest or additional charges for extensions for late completion.

Obtain a Clearance Certificate: You will need a Clearance Certificate from Revenue Canada prior to the completion date of your transaction. The current wait for a Clearance Certificate is 6 to 8 weeks, so it is important to contact your lawyer or accountant as soon as an accepted offer has been received. Before issuing the Clearance Certificate, Revenue Canada will need to collect any tax payable on the property to be sold.

Calculating Capital Gain...

When you sell your property at a gain, you will have to pay Canadian taxes. There will be a withholding tax on the selling price unless a NR6 form has been obtained. Once you file your Canadian tax return reporting the gain, you can recover the some of the withholding tax. You should seek advice from a Canadian Accountant or Tax Lawyer.