21 Sep Top 5 Costs Commonly Incurred when Purchasing a Property
We are often asked by our clients to outline the costs that they may incur when they purchase a home. Many first-time home buyers often believe that they are only paying the purchase price that they agreed to pay in a Contract of Purchase and Sale. However, this is not the case. When you purchase a property, your real estate lawyer will present you with a statement of adjustments which will have a number of additional fees and expenses that have to be paid at the time of completion. The following is a non-exhaustive list of fees and expenses that you may incur in addition to the purchase price:
- Property Transfer Tax (“PTT”). PTT is payable on the transfer of all properties in British Columbia. It is 1.0% on the first $200,000.00, 2.0% on the portion that is between $200,000.00 and $2,000,000.00 and 3.0% thereafter. It is important to note that the tax is payable on the fair market value of the property (which is typically the purchase price). For example, the sale of a property with a fair market value of $450,000.00 will result in PTT of $7,000.00. It is important to discuss the PTT with your lawyer and Realtor as there are several PTT exemptions that may apply, including an exemption for first-time home buyers (subject to several eligibility requirements);
- If you are receiving a loan or a mortgage, default insurance premiums may be charged by the lender (the most common insurance provider is CMHC). This is insurance that the lender charges in the event that you default on your payments. The amount of the premium is determined as a percentage of the loan and can vary based on the size of your down payment. With house prices in Victoria, the premiums can be substantial so you will want to discuss them with your lender early in the process;
- There are also a number of adjustments that may represent a credit or a debit to you, including the following:
- Property taxes. If the purchase occurs after annual taxes have been paid by the seller (the deadline is usually the first Monday of July each year), you will have to reimburse the seller for the portion of the year that you will own the property. On the other hand, if the purchase is prior to the taxes being paid by the seller, you will receive a credit from the seller for the seller’s portion of taxes for the year for that they have owned the property up until the date of completion; and
- Utilities. If the utility bills have not been paid by the seller, you will receive a credit for the period that the seller has owned the property and you will be required to pay the entire bill when it is rendered;
The lawyer’s account, this will typically be broken down into two categories, legal fees and disbursements.
- Legal fees are the fees that the lawyer charges for the work that has been done. At Victoria Lawyers, Sitka Law Group, we charge a flat fee for our real estate services. Disbursements are the costs that the lawyer has incurred in the transaction such as the cost to obtain a title search, land registration costs, etc. The lawyer passes these costs onto the purchaser.
If you are thinking of purchasing a property and have questions about the process or the costs involved, please feel free to contact Sitka Law Group for a free consultation to discuss the transaction and how we can be of assistance to you.