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.

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.

Attic Conversions – To Finish or Not to Finish?

Feeling claustrophobic? Walls starting to close in on you? The answer may be right above you. A recent article in the Vancouver Sun delves into the pros and cons of converting your attic into living space. In a town like Vancouver where houses are often selling in excess of $400 per square foot (PSF), this is likely a wise investment.

Cheaper than building a new laneway house (starting at around $200 PSF), an attic conversion (starting at around $35 PSF) makes unused space within an existing home usable. On top of that, any added space will add value when it comes time to sell your home.

Older homes are the best candidates for attic conversions while newer houses that utilize roof truss systems will often be more costly to convert. The basics of an attic conversion are ensuring it is properly insulated and ventilated and that the floorboards are adequate to support people and furniture. You can go all out and add dormers but expect your costs to be significantly higher. Skylights are a good investment with any attic conversion due to lower/sloped ceilings.

Whether creating a no-go zone for the kids or somewhere to stash them, new space is usually a welcome addition. No kids? Home theater or home office perhaps? Did I mention the views are generally better up there.

How to Hire a Contractor

This will be a touchy subject for people who’ve ever hired a nightmare contractor (if this is you and you’re reading this I apologize for not positing earlier). As a REALTOR® in Vancouver, I have seen more than my share of renovation projects gone terribly wrong. Here are a few simple suggestions to help make your renovation project go smoothly.

Create plans and sketches first:
Write down as much as you can before even meeting with contractors to be better prepared for contractor interviews and questions. You can modify requirements after meeting and selecting a contractor but this at least gives a starting point for discussions.

Get references:
Try to speak with and, better yet, meet some of the people who’ve had work done by the contractors in question. If possible, visit one of the contractor’s current project sites to see how he/she carries out the work.  Also, one person’s idea of quality workmanship can vary greatly so do your due diligence with all references. Relatives of the contractor don’t count as quality references!

Get multiple quotes:
This may seem obvious but you have nothing to lose by meeting and discussing the project with several contractors. A little extra time spent before the project gets underway will pay dividends later in the project. You may be alarmed by the variation in quotes you receive. Don’t be surprised if some contractors don’t even bother calling you or submitting a written quote.

Always meet the contractor face to face at least once before the project starts:
This may seem obvious but I know of people who have hired contractors after just a short phone conversation. Remember this person and their employees are going to be spending time in your home. This is your chance to make sure you can tolerate each other before any work starts.

Get it in writing:
Having a good rapport is great but getting all details of the work to be done in writing is even better. You have nothing to lose as a property owner by documenting and agreeing on the terms of work to be done. Run the other way if a contractor refuses or claims to be too busy to submit a written quote.

Agree to a payment schedule:
This is very important and will protect the property owner somewhat. If things aren’t going well and/or you are dissatisfied with the work being performed you can stop the work before further damage occurs. I suggest payments of 10% at the outset and then three payments of 30% as the work progresses and milestones are reached. Be wary of a contractor that wants a large payment up front. Another advantage of spreading payments is motivating the contractor to finish the project in a timely fashion – a frequent complaint about contractors.

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

More Info:
Get it in writing! – Canadian Home Builders’ Association

7 Biggest Property Seller Mistakes

Pricing your property too high: Just because the house up the block recently sold for a hefty sum does not necessarily mean your home is worth as much. That new roof and furnace are tangible improvements and do add $20K to the market value. Not being realistic about this can cost you time and money. Buyers may place your property on a backup list rather than a ‘hot list’ of homes to view and worse, they may buy one of the initial homes they visit without ever setting foot in yours.

Not having a CMA created: A Comparative Market Assessment is a survey of recently sold and active listings in your area. The CMA report compares your property to these sold and active listings and forms a basis for predicting a realistic asking price for your home. Other useful data contained in the CMA include: days on market, asking price vs. actual selling price, and other important property comparison details.

Not preparing your property: You want your property to be seen in the best possible light from Day 1. Make sure to clear out the clutter, keep things tidy during showings/open houses, make necessary repairs and do the routine maintenance before your home hits the open market. The items you don’t repair will become apparent during the buyer’s home inspection process anyway so why not get them attended to now.

Doing over-the-top renovations: This can often have unintended consequences as many buyers prefer simple styles and are not willing to stray too far outside the lines. Even if they can be convinced to purchase a home with unconventional upgrades, getting them to pay an amount anywhere close to what they cost to have installed is another story entirely. So think twice before installing that sauna and jacuzzi in the spare bedroom.

Making it difficult to view your home: This ties in with overpricing in that buyers may be busy making offers and buying comparable homes instead of buying yours if they can’t make an appointment on reasonable notice to view it. Giving easy access to buyers will go a long way to ensuring a quick sale and will show buyers that you are serious about selling. So yes, you may have to schedule Poker Night elsewhere while your property is being marketed.

Being too emotionally attached to the property: Don’t be offended if the first offer you see is substantially lower than your asking price. There will always be bottom feeders in the market and these initial buyers may ultimately purchase your home. Once you decide to sell, the property is no longer your ‘home’ but instead simply an asset you need to part with. This may be one of the most difficult things for sellers as people have a tendency to get attached especially if they’ve owned a home for a long period of time.

Not using a REALTOR®: For the vast majority of people, marketing their home without a REALTOR® is not a realistic option. The factors working against you include: substantial time investment required, not being able to maintain an arm’s length relationship with potential buyers, having to be available to show the property at all times, and not having access to the MLS® system. Unless you have no job and no life you will likely find this more work than you are willing to undertake.

I welcome any questions you may have about selling or buying.

Feel free to comment or contact me directly.