Aaron Nicklen PREC - THE NICKLEN GROUP

When it comes to buying a home, there are many expenses and taxes that you will be responsible for beyond the mortgage and down payment. One of these is property transfer tax.

We created this helpful guide of everything you need to know about property transfer tax for your home purchasing or selling process.

What is property transfer tax?

Property transfer tax is a tax you must pay to the province whenever a transfer of ownership of real estate property from one owner to another occurs. This tax is based on the fair market value of the property in question. All types of real estate, commercial or residential, have to pay property transfer tax.

What is fair market value?

Fair market value is the price the home is worth on the open market, determined based on several factors. Usually, the selling price is the largest determining factor.

A property transfer tax is different from an actual property tax, which you will need to pay every year once you own a home. The property transfer tax is a one time expense for re-allocating ownership of the property.

Can I get an exemption?

Of course, we always want to know if there is a way to save money. Luckily, there are situations where the property transfer tax can be reduced or eliminated.

If the property is valued at less than $525,000, and it is your first time purchasing a property, you could be eligible for theFirst Time Home Buyer Exemption.

On the other hand, theNewly Built Home Buyer Exemptioncould apply if the property is fairly new and valued at $750,000 or less.

For these exemptions, you also need to be a Canadian citizen or permanent resident and meet a few other criteria. There are manycalculatorsand resources online to help you determine how much you qualify for. Talk to your Realtor if you are still not certain.

Does property transfer tax increase with higher value properties?

Yes, the property transfer tax calculation is 1% of the first $200,000; 2% of the balance up to $2 million; 3% of the balance between $2 million & $3 million; 5% of the balance over $3 million.

You will also need to pay significantly more in taxes if you are a foreign national, foreign corporation, or taxable trustee, currently an additional 20% of the purchase price, in our area.

What is an open market transfer vs non-open market transfer?

An open market transfer means that the property was available to be viewed and bid on by the public. In most cases, the price the property was sold at will be considered fair market value, unless the property has significantly changed since then.

On the other hand, a non-open market transfer occurs if the property was not publicly available and the property transfers ownership privately. In this case, the fair market value is determined by aBC Assessment property valuation, unless major changes are made between the assessment and sale.

Now that you understand the basics behind property transfer tax, we hope you are able to go into the home buying process with more confidence. If you have any questions, you can always ask your real estate agent.

If you are ready to purchase a home on Vancouver Island, contactThe Nicklen Group.

Home Buyer Rescission Period: Everything You Need to Know

What is the three-day rescission period?

There is a new three-day rescission period coming to British Columbia real estate January 3rd, 2023. Below are some tips for buyers and sellers in British Columbia, so they can understand how this change will affect them.

Beginning January 3rd, 2023, all residential real estate transactions in British Columbia are subject to a mandatory three-day Home Buyer Rescission Period (HBRP). There are a few small exceptions to the rule: residential leasehold properties or residential real estate on leased land, residential property sold at auction, residential property sold by order of a court, or most new developments covered by Developers Disclosures are allexempt from the new rule.

What is the Home Buyer Rescission Period (HBRP)?

The HBRP is a mandatory subject to be included in all offers to purchase residential real estate in British Columbia that states all buyers will have a period of three full business days, not including weekends or holidays, to use the Rescission Period to rescind their offer if they so choose, for any reason whatsoever. If they choose to exercise this right and rescind an accepted offer using the Rescission Period, then they owe to the seller the rescission fee, 0.25% of the agreed purchase price, to be paid in a prompt manner from the buyer to the seller directly.

Who is affected by the HBRP?

Bothbuyersandsellersare affected. All offers received on residential property will include the Three-Day Rescission Period as a subject to the sale, regardless whether there are other subjects or not. This subject cannot be waived and is mandatory for all residential real estate sales, including for sale by owner and non-realtor transactions. The clock to begin the countdown for the three-day period begins at midnight the morning of the next business day after acceptance date, and continues until midnight at the end of the third business day.

How does the timing work for the rescission period?

Generally, most offers contain some subjects to the sale of the property, such as a financing or a building inspection subject. Most often these subjects have dates that extend longer than three business days as it takes time to book professionals. Both the HBRP subject and any other subjects have their clock run at the same time, meaning buyers will have an opportunity for three days to rescind their offer for any reason for a fee; but after that three-day period, the only way to rescind their offer is to not remove one of their other subjects.

Using the Home Buyer Rescission Period

If a buyer chooses to rescind their offer using HBRP, they will then owe the seller a fee equal to 0.25% of the purchase price. If the agreed purchase price of the property is $1,000,000 (one million dollars), then the associated fee would be $2,500 (two thousand five hundred dollars). If any monies are held by the brokerage as a deposit for the property, then the brokerage has the right to pay the seller directly the 0.25% and then return the rest of the deposit monies to the buyer. However, if monies are not being held in trust by the brokerage, then the Seller must seek compensation from the buyer directly, possibly using small claims court or the civil resolution tribunal if the buyer is unwilling to pay.

As with any changes to the Property Act, the details can be confusing. Be sure toenlist the services of a realtorto help you understand all the potential risks when entering into a purchase agreement contract.