Understand the paperwork when buying a home

When someone wants to buy a home, they must make a written offer to the seller. In BC, this is typically done with a standard purchase contract. There are additional documents you may come across during this period. We explain three of the main ones below, which are all meant to tell you more important information about the property.

First, the document that kicks things off. If you find a home you want to buy, you must make a written offer to the seller. In BC, this is typically done using a standard contract of purchase and sale. 

The purchase contract sets out the rights and obligations of both the buyer and the seller. It says who must do what, and by when. We walk you through the standard purchase contract here. 

Before you sign the offer, read the contract carefully. It may lead to a legally binding contract if the seller accepts your offer. Legally binding means you and the seller must each perform your obligations under the contract (or run the risk of being taken to court).

The property disclosure statement provides information that’s of interest to potential buyers. It’s usually referred to as a PDS. It covers issues that could affect the value or safety of the property.

Sellers aren’t legally required to complete a PDS. But it’s become standard practice in BC. If your realtor doesn’t mention it, ask them to request one. And make sure you see it before you make an offer. The seller should tell you what they know about certain details relating to the property that a potential buyer would want to know. For example, is the property connected to a municipal sewer or on a septic system?

The seller and their realtor must disclose latent defects

Under common law, a seller must tell a buyer about any latent defects they’re aware of. Sellers usually do this by filling out a PDS. A latent defect is a problem that can’t be detected by a reasonable inspection of the property. Common examples include: 

• a history of flooding or insect infestation

• structural damage to the property

• underground storage tanks located on the property

• problems with the drinking water 

As well, the seller’s realtor has a legal obligation to disclose material latent defects that are known to them. Legally, this is broader than the seller’s obligation. If the seller doesn’t want their realtor to tell buyers about any such defects, then that law says that the realtor must stop representing them. The BC Real Estate Association has a video that explains a seller’s disclosure of material latent defects.

Relying on what the seller says

There are limits to how much you can rely on what the seller says in the PDS. Take it with a grain of salt. As long as a seller is honest about what they know, the law doesn’t require that what they’re telling you in the PDS is correct. You also may not be protected if you should have known about the defect.

As well, you cannot rely on anything the seller or their realtor only says orally. But if the seller makes a written representation or promise in the contract itself, it must be factually correct. Consider trying to build what’s said in the PDS into the purchase contract. That way, the seller will be bound by anything they say in it. Ask your realtor or lawyer about wording you can use to incorporate the PDS into the contract.

Most buyers make their offer subject to getting a satisfactory home inspection report. Having an expert check the home is the best way to get an honest and informed opinion about its condition. You can check to see if a home inspector is licensed in BC. A licensed inspector must meet certain training requirements and have at least $1 million in liability insurance.

A home inspection can’t guarantee that you’ll uncover every problem. The report must list areas that were not covered by the inspection. Most home inspections are visual. The home inspector will typically be limited as to what the inspector can access and see. This means they might not be able to tell you if there’s a defect behind walls, underneath floors, or in an attic. Inspectors usually check a building’s systems and structural components such as electrical, plumbing, structure, insulation, and ventilation.

It’s important to take the time to read the contract you’re signing. Under the law, a home inspection contract must say exactly what is covered in the inspection. The contract must also say whether the home inspector will inspect for mold or asbestos. 

Read the inspection report carefully. Expect a lot of detail — the reports are designed to be comprehensive. All homes have problems, even relatively new ones. Some problems are significant, and others are no big deal. When reading the report, focus on the problems that would make the home unlivable, or would be expensive to repair. 

Having title to land simply means that you will be legally recognized as owning it. A title search will show any restrictions on the property. The land title office keeps an official record of who owns what land under BC law. It also keeps a record of any encumbrances that might be registered against the property. These are charges that may restrict how the property can be used, or reduce its value. Common examples are mortgages and easements.

Before you commit to buying a home, you should satisfy yourself that you’ll be able to use the property as you intend. This includes finding out about any restrictions on its use. 

A title search shows who the owner of the home is, and any related encumbrances. Any existing financial charges must be removed by the seller as part of the sale. An exception is if you have agreed to assume the charge, such as assuming the seller’s mortgage. 

A title search may reveal non-financial charges against the property that restrict how the land can be used. For example, you might not be allowed to build multi-unit dwellings on the land. Under the standard purchase contract, a seller isn’t required to remove these non-financial charges from the property. The restrictions come with the property. 

It’s common for the buyer’s realtor to obtain a title search during the subject removal period. If anything unusual comes up, your realtor should tell you to talk to a lawyer. Once the deal is firm, your lawyer or notary will also do a title search.

The final document signing usually takes place at the office of your lawyer or notary. This happens on, or a few days before, the completion date. That's the date when ownership of the home is legally transferred to the buyer. 

Here we walk you through six common documents your lawyer or notary might get you to review or sign. 

When someone sells their home in BC, they have to fill out a document called a form A transfer. This document transfers ownership of the property. It’s filed with the land title office. Then the official record is updated to reflect that you’re the new owner of the property.

This form is typically prepared by the buyer’s lawyer or notary, but it’s signed by the seller. As the buyer, you should check that:

• Your name is spelled correctly. The form should show your full legal name. Ask your lawyer or notary what to do if this name differs from the name that appears on your purchase contract. 

• If there is more than one owner, the form correctly indicates the way you want to hold the land (in joint tenancy or tenancy-in-common). If you’re unsure, ask your lawyer or notary to explain the difference to you.

• Your address is correct. If you’re moving into your new home, use your new address. This is how you’ll receive important mail related to the property, such as property tax assessments.

When you buy property, you’re responsible for filing a property transfer tax return with the land title office. You’ll also have to pay any related property transfer taxes. If you don’t do this on time, the land title office may refuse to register you as the new owner of the property.

Typically, the buyer’s lawyer or notary completes the return. They’ll ask you to sign it. They should also tell you how much tax you need to pay. Generally, you give this amount to your lawyer or notary, and they’ll pay it to the land title office on your behalf.

A statement of adjustments is a document that lays out the financial obligations of the buyer and seller. The final line on your statement of adjustments tells you how much you must pay to complete the transaction. 

The calculation starts with a debit for the purchase price. Adjustments are then made to increase or reduce the amount you still owe (to the seller or to others).

A debit is something you must pay for when you close. Debits increase the total amount of money you must pay. Typical debit adjustments include the following:

• Property transfer tax, goods and services tax (GST) if it applies, lawyer or notary fees.

• Property taxes. A seller might have already paid an annual bill for property taxes. Some of those taxes might relate to a time when you will own and use the land. The adjustment recognizes that you must pay the seller back for that amount of property tax.

• Strata fees. Similarly, a seller might have prepaid monthly strata fees for the month you’re moving in. 

• Title insurance. This insurance protects your lender from problems related to the property’s title. You can also purchase your own title insurance at the same time.

A credit is money you’ve already paid to the seller (for example, a deposit), or you’ve paid or will pay to a third party on behalf of the seller. A credit reduces the amount of money you must pay on closing. Some typical credit adjustments include the following:

• The deposit. This is a credit because you’ve already paid this part of the purchase price to the seller.

• Any amounts you’re borrowing that your lender will pay on your behalf. The mortgage reduces the amount of the purchase price that you have to pay out of your own pocket.

• Property taxes, strata fees, or utility expenses. You might receive the bill for expenses that relate to a time when the seller owned the home. Adjustments should be made for these. 

  Budget for property tax

  Your lawyer or notary should alert you to any upcoming property tax bills. Make sure to budget for the payment.

If you’re borrowing money to buy your home, you should have already met with your lender (or a mortgage broker) to negotiate the terms of your mortgage. At closing, you’ll need to sign the mortgage loan agreement. This is the agreement between you and your lender that sets out the terms of the mortgage. 

Your lawyer or notary should clearly explain the terms of the mortgage to you. Make sure you understand the fees, type of loan, interest rate, payment amount, and schedule. Are they what you were expecting? Make note of when your first mortgage payment is due. 

Learn more about getting a mortgage.

A direction to pay contains your instructions for what to do with the mortgage money. Your lawyer or notary will prepare this document for you, but you’ll be asked to sign off on it. You may instruct: 

• your lender to pay the mortgage amount to your lawyer or notary

• your lawyer or notary to allocate the mortgage money to different parties (for example, to the seller, to taxing authorities, or to pay legal fees)

A form B mortgage is a document that’s filed with the land title office. It’s used to register the mortgage against the property. The form also provides key details about the mortgage, such as its amount, the interest rate and the loan period. You’ll be asked to sign this form.

Under the law in BC, a mortgage gives the lender a charge — meaning an interest or a right — against the property. That charge gives the lender rights if you default on the mortgage. For example, if a borrower doesn’t make their payments on time, the lender can sell the property to pay the debt. 

You’ll also be asked to sign a document acknowledging you received copies of:

• the form B mortgage, and

• the standard mortgage terms.