Real Estate Closing Costs

Once you have an unconditional accepted offer on a home you are selling or buying it will be time to start thinking about which lawyer or notary you will use for completing the transaction. Closing costs will vary depending on how complicated the transaction is and somewhat upon which firm you choose. The closing costs will vary depending on whether you are buying or selling. Buyers can expect the following costs at closing:

  • Property Transfer Tax (PTT) on most properties and possibly Goods and Services Tax (GST) on newly-built properties
  • Legal fees – These include lawyer/notary professional fees, land title search, land title registration and other nominal fees
  • Closing adjustments (property taxes already paid by the seller, etc.)

Sellers can expect the following costs at closing:

  • Fees to discharge/payout a mortgage
  • Lawyer/Notary Fees
  • Real estate commission fees and possibly withholding tax (applies to non-residents of Canada)
  • Closing adjustments

The statement of adjustments is the document which lays out the amounts owed and the credits due to both the buyer and seller. During the appointment with the lawyer/notary, buyers and sellers will be presented with this summary of charges/credits with either a final amount due (buyers) or to be received (sellers).

It’s a good idea to speak to a potential lawyer/notary about there workflow and their schedule before choosing one so that the closing process will go smoothly with plenty of time to sign documents before completion date.  I have several good lawyers and/or notaries I can refer should you require one.

Intentionally under-pricing your property

The practice of pricing a property below market value has become popular recently in the Vancouver real estate market. The seller’s goal is to entice the maximum number of buyers, and therefore multiple offers, in the shortest time and to pressure them to battle each other in a bidding war until a clear “winner” is identified. A feeding frenzy may be the best analogy.

Bait ball 1

This strategy works best in hot neighborhoods where there are many more buyers than sellers. This is the worst situation for a buyer since it adds pressure to the purchase and often results in the need to eliminate subject clauses in order to have the best chance of “winning” the property in a bidding war. Sellers (and sellers’ Realtors) love this approach when it goes as planned.

There’s always a possibility that an underpricing strategy could backfire and not attract any buyers to an initial offering. This situation can be identified when a property comes on the market and then shortly thereafter the price is jacked up substantially.

If you can’t stand the added pressure as a buyer, bidding against multiple offers on an under-priced property may not be for you.

Wood-framed or a concrete condo building?

choice[dropcap]S[/dropcap]o you decide you’re ready to purchase a condo. Friends have told you that either one or the other is the way to go. Let’s look at the pros and cons of both buildings for your condo purchase.

Benefits of wood-framed condo buildings:

  • Cheaper than concrete in general
  • Generally only found in low rises (four floors normally but recently the building code in BC was changed to allow for six-story wood construction)

Drawbacks of wood-framed construction

  • More noise transfer between units
  • Require more maintenance than concrete buildings

Benefits of concrete construction

  • lower maintenance
  • less prone to water ingress (“leaky condo”) issues

Drawbacks of concrete construction:

  • Higher cost of construction
  • Normally only found in high rises due to higher cost of construction

Ultimately you’ll need to decide if the additional cost for concrete construction is worth the premium. A well constructed wood-framed building can perform well over the years. A good home inspection can go a long way in determining if a property is a wise buy.

Please let me know in the comments below if you’ve had good/bad experiences in either.

Shopping for Ranches – A Log Cabin on 20 Acres

 

Every once in a great while I get a chance to work with real estate buyers shopping for property outside of Vancouver. This opportunity recently presented itself so I dusted off my gum boots and other gear and prepared for a trip to the Okanagan. Past property research expeditions have led me to Gabriola Island, Vancouver Island, Washington State and as far north as Quesnel.

Log Cabin

We visited several majestic spots over two days; it turns out that you sometimes need to drive long, steep access roads to reach the great views. We also wound up looking at property at some less-than-majestic spots but like everything, you take the good with the bad.

The property that my clients settled on is a log cabin on nearly 20 acres about 45 minutes from Vernon in the Creighton Valley. As luck would have it, there was a river running though it. Okay, more like a seasonal stream or a brook. On a side note, I was caught red-handed removing some rhubarb from the property as the listing Realtor pulled into the driveway. I assured her that the rhubarb was strictly for due diligence purposes.

Renovations are underway with B&B rooms to be ready soon! Hopefully my clients/friends remember all my hard work when it comes time to pay for my stay at the B&B.

New program to encourage rental housing construction

There’s a new incentive program in Vancouver to encourage developers to build purpose-built rental housing.  There are some seemingly attractive aspects of this program but developers seem more focused on tidier short term profits and these are more quickly realized building condo towers.

Incentives under the new policy will likely be similar to those of the STIR program which included:

•  rental property assessment (on rental units only);
•  development cost levy waiver (on rental units only);
•  parking requirement reductions (on rental units only);
•  discretion on unit size;
•  increased density; and
•  expedited permit processing.

Whether this program will be enough to entice developers to build new rental units is a matter for debate. One thing is certain and that’s there is a shortage of affordable rental housing in this city.

Can a buyer extend a conditional contract at their discretion?

This is a question I’ve often been asked by buyers and sellers. Situations do vary but in order to even contemplate being able to do this there must be agreement by the seller. Subject clauses will have deadlines (the date by which they must be removed by the buyer or seller – most often the buyer who is making the offer).  If the seller will not agree to extending the subject removal deadlines, then no amendment to the contact of purchase and sale will be possible and the offer will likely collapse.

Here are a few scenarios where the seller would be wise to agree to extend the subject removal deadlines:

1. When a buyer needs a little more time to secure financing and has shown good faith so far in their due diligence process.
2. When a buyer had an unforeseen emergency and has not been able to perform all the due diligence necessary by the original deadline.
3. When the market is softer and buyers are harder to find.

I would not recommend allowing a buyer to extend deadlines when they need more time simply because they have been lax in doing their due diligence such as: having a home inspection done, going through strata documents, etc. After all, time is of the essence in real estate.

5% Down – Available to some purchasers but not necessarily advisable

Just say no to 5% down. Unless of course you’re a gambler or expect a steep salary increase in the short-term or some sort of windfall is on the horizon… Here’s a convincing Globe and Mail article on the reasons why a low down property purchase may not be a prudent decision.

Photo courtesy USACEpublicaffairs.

Purchasing with 5% down is most likely not for the faint of heart. If there is a market downturn a property owner could quickly be in a negative equity situation. If property values do start to decline we could see mortgage lending rules tighten up and the minimum down payment requirement could increase.

So here’s the simple point: If you have to stretch yourself financially to buy a new home, you’re probably not ready to trade in your landlord for a lender. If you do press forward with just 5 per cent down, be prepared to stay in your home a while – potentially a long while.

If you must press on with your low down payment purchasing plans make sure you have a contingency plan, or better, access to emergency funds. If you do make a purchase with the minimum down payment and run into trouble in the future, I’m here to help 🙂

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

Underground Storage Oil Tanks (UST)

Did you know owners of properties in Metro Vancouver may have a potentially costly underground storage oil tank (UST) in their backyard? Clean-up and liability issues can come into play if the oil tank leaks and contaminates your property. If the contaminant originates on your property and then seeps onto adjacent properties, you could be liable for the mess and any clean-up on those properties. Ouch! 

Underground oil tanks were commonly installed on properties beginning in the late 1950s. Oil was the primary source of heating fuel for homes until natural gas replaced it due to lower cost and ease of connecting to utility gas pipelines. The oil tanks were usually just capped and decommissioned in place at this point – some with oil remaining in the tanks!

There are many companies in Metro Vancouver that use scanning equipment to check for buried oil tanks for a nominal fee. If there is any possibility that there may be a UST, doing the scan makes sense for buyers and is almost always advisable for sellers. Caveat emptor (buyer beware) is the best policy when it comes to oil tanks and avoiding the associated risks with buying a property where one may be lurking. The cost to remove a decommissioned tank that has not leaked is much less than a major environmental clean-up of a decommissioned leaky tank. Insist on full and proper tank removal documentation in the purchase contract if you are a buyer.

To complicate matters further, different municipalities around Metro Vancouver have different requirements to follow during removal. For further reading I recommend a great article by The Spagnuolo Group of Real Estate Law Firms.

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

Rize Alliance Development – Public Hearing for Mount Pleasant Tower Proposal

Figure A shows a rendering submitted by the developer. Figure B shows the virtual model created by the City. Figure C shows a rendering created by RAMP. Image courtesy of Openfile.ca

One of the most divisive proposed developments in Vancouver in a long time is currently being considered by Vancouver city council. The Rize Alliance Properties development at Kingsway and Broadway promises to radically change the area where Kingsway, Main and Broadway meet. An article from BC Business is in support of this development and offers some insight into the issues. The original development proposal was more aggressive at 26 stories but has since been scaled back to 19 stories following public opposition. Notice in the renderings above how the building height differs depending on which party it was created by and their particular interest. The rendering closest to reality is likely the one created by the City.

It seems to me that this location is an ideal place to increase density since it’s well-located close to public transportation along the Broadway corridor and is a walk or quick bus ride to two Skytrain lines. The anti-development types are unlikely to be satisfied with any proposal put forward but many Mount Pleasant residents are watching this one closely to see what the City will allow.

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

Will the real estate market and prices remain stable in 2012?

Some interesting predictions from a new poll of Canadian financial strategists and analysts. Get out your crystal ball and get ready to play “Guess where the market is going!” http://cravecanada.com/wp-content/uploads/2008/08/vancouver.jpg As a REALTOR® I get asked almost on a daily basis what the market will do next. Unfortunately this is anyone’s guess. Of  the poll respondents, only 60% of these experts would even attempt a guess at the price forecasting.

The referenced article shares what might be on the horizon. If we do see a small drop in prices I don’t expect much in the way of a major market adjustment. Sure, people who bought with a very minimal down payment and are in a variable rate mortgage could feel the pinch but for the most part Canadian banks are conservative and don’t lend money easily.

Stay tuned here for updates on he market situation and for predictions on where the market is headed. Not from me directly of course, I gave up guessing long ago.

Do your homework and enlist the services of a well-recommended REALTOR® before undertaking a property search to best protect yourself.

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.