If you are in the market for your very first home, it is easy to underestimate the cost of buying a property as there are other costs involved in addition to the purchase price. From property transfer tax to conveyancing fees, these additional expenses can quickly add up.
So, we have compiled a list of costs that you should be aware of before you start house hunting.
*Please note that this list is not comprehensive and can vary
1. Property Transfer Tax
This is a one-time tax that most purchasers of property in British Columbia must pay. The amount of property transfer tax depends on the market value of the property being purchased. For example, if you are buying a home for $750,000, you will have to pay a property transfer tax of $13,000.
The rates for property transfer tax are calculated as follows:
- 1% on the first $200,000,
- 2% in the portion greater than $200,000 and up to $2,000,000, and
- 3% on the portion greater than $2,000,000 (plus an additional 2% for the portion greater than $3,000,000).
However, there are some exemptions to property transfer tax. For example, if you are a first-time buyer, you may be exempt from paying property transfer tax if the fair market value of the property is less than $500,000. There is also a partial exemption available for properties having a fair market value between $500,000 and $525,000.
2. GST (Goods and Services Tax)
Generally speaking, GST is only payable on the sale of new homes in British Columbia. For example, this includes pre-sale condos or newly built detached homes. Also, if a used residential home has been substantially renovated (i.e. 90% or more), it may trigger GST.
On the other hand, properties which have already been lived in and used for residential purposes will typically be exempt from GST, since the GST would have already been paid when the home was new.
When GST is payable, the GST rate is equal to 5% of the property’s fair market value, and is usually in addition to the purchase price.
The rules governing GST are complex, and there may be other factors which affect whether GST will be payable on the sale. You should consult with a lawyer or tax professional to determine whether GST is payable.
3. Legal Costs
When purchasing a property, there are several legal documents that must be drafted and/or filed with the Land Title Office to formally effect the transfer of property from one party to another. This process is known as conveyancing and (for residential real estate as at the date of writing this post) typically costs between $1,500 and $3,000 depending on the type of the transaction, and what steps are involved. For example, whether there are multiple discharges or registrations that need to occur in order to have title delivered free and clear of all encumbrances and/or financial charges.
The legal costs generally cover:
- conveyancing fees,
- land title searches,
- discharge fees,
- registration fees, and
- office disbursement costs.
4. Home Inspections
It is recommended that you obtain an independent home inspection as part of your due diligence process. The cost of the inspection could end up saving you thousands of dollars if there are unknown problems or issues with the property, which a home inspection should reveal. If you are looking to secure financing to purchase the home, the lender will often require a home inspection before issuing the mortgage.
The cost of the inspection is largely dependent on the type and size of the property, so it could range anywhere between $500 and $2,500. This amount is generally what we have encountered (as at the date of writing this post), however the true cost will depend entirely on your specific situation and type of property being purchased.
A professional home inspector will examine the property you intend to purchase and report any problems or deficiencies they find relating to the property.
5. Appraisal and Land Survey Fees
If you need an appraisal to support your mortgage application or a land survey to determine the boundaries of the property, these can range from $500 to $2,000 each. Again, this amount is generally what we have encountered (as at the date of writing this post), however the true cost will depend entirely on your specific situation and type of property being purchased.
6. Title Insurance Fees
Protecting yourself against title issues that may arise after the purchase is important and is nearly always required by a lender. The cost of title insurance ranges between $150 and $500, and it’s cost generally tied to the purchase price of the property. It is often included as a disbursement in addition to a lawyer’s (or notary’s) fees.
7. Closing Cost Adjustments
In most property transfers, the seller will have prepaid certain property expenses in advance such as strata fees and property taxes on behalf of the buyer. Conversely, the buyer might pay for expenses that benefit the seller. So, before the sale is finalized, the lawyer or notary will typically prepare a Statement of Adjustments where the buyer and seller reconcile these amounts and establish the final amount owing to complete the sale.
Key Takeaways
When buying a home in British Columbia, it is important to be aware of the costs in addition to the purchase price.
Making sure to budget for these additional expenses is essential so you are not caught off guard when it comes time to close on your property.
Please note that this blog provides examples and is not a complete list of all costs that may apply in every transaction. Specific situations may vary. You should consult with a lawyer who can help you understand what the costs will be in your circumstances.
Solimano Law is a boutique law firm with a focus on real estate legal services. We provide comprehensive legal advice to both buyers and sellers regarding residential real estate transactions. Our knowledge of real estate litigation means that we are well positioned to provide you with timely advice, prevent potential problems before they arise, and proactively deal with the many issues that may arise from real estate transactions.
If you need legal advice or representation for your real estate transaction, get in touch today.
Disclaimer – The information contained herein is of a general nature. It is not intended to be legal advice and it is not intended to address the exact circumstances of any particular individual or entity. No one should rely on or act upon such information without receiving appropriate professional advice and without a thorough examination of their particular situation. Please contact our office if you have any questions with respect to the content of this entry, this website, or our Terms and Conditions .