chapter 24 ravi Flashcards
what is involved in the contract of purchase and sale?
- the licensee has a responsibility to ensure that a binding contract of purchase and sale is entered into between the seller and the buyer.
- in bc the real estate industry uses a standard form of contract of purchase and sale for most residential transactions (this is good because it is the same contract over and over)
- the realtor will get the contract and addendum signed by all parties
- the buyers realtor gets the deposit from the buyer and drops it at his brokerage to be deposited in the brokerage trust account
- the realtor will provide to his or her brokerage a copy of the contract (plus any addendum)
what are the three important contract dates ?
- completion date
date on which the purchasers solicitor undertakes to the vendor (or vendor solicitor) that he will pay the balance owing to the vendor upon the transfer of title being accepted for registration - possession date
date on which the purchaser take the possession of the property - adjustment date
date on which adjustments of property taxes, rent and other items are to be made
note:
all dates can be the same or different
it is not advisable for a realtor to set completion and the possession date to be the same because there may be some delays in registration
what is conveyancing ?
the process of transferring an interest in land (ownership) from one person to another
what is the process of conveyance? what steps are involved?
the buyer chooses the conveyancer (notary or lawyer) for
the conveyancing and
the mortgage (loan) documents and
registration
the buyers real estate brokerage will send
the copy of contract that was signed between buyer and the seller to the conveyancer
the excess deposit to the conveyancer
the conveyancer
will receive the contract and balance of deposit from the brokerage
will prepare the form A freehold transfer (Form A)
will prepare the property transfer tax form
will prepare both the sellers and buyers statement of adjustment
will send the form A and sellers statement of adjustments to the sellers conveyancers (lawyer or notary) for reviewing and signing
will file form a at the land title office
lenders conveyancer:
will prepare the mortgage documents and send it to the buyers conveyancer
the buyer
will attend the buyers conveyancer office for signing and bring the money due to complete
will sign the property transfer tax form, buyers statement of adjustments, mortgage documents and documents
payment process
the lenders conveyancer sends to the buyers conveyancer the net mortgage proceeds
the buyers conveyancer, on receipt of those proceeds , and already having in trust the balance due from the buyer will do the completion
the buyer conveyancer will make payments in accordance with the statement of adjustments
payments to existing lenders, sellers, commissions to brokerage
payments to the municipality (if there are outstanding taxes)
what is the statement of adjustments
provide the parties with detailed information
on a buyers statement, the conveyancer is calculating the amount of cash the buyer must be able to provide to the conveyancer in order to complete the transaction
on the sellers statement, the conveyancer is calculating the amount of cash the seller will receive from the conveyancer on completion
the buyers statement and the sellers statement are not comprised of identical information
the buyers statement and the sellers statement are never shared (privacy) or shown to each other
to calculate the balance due from the buyer (the balance due to complete) and the balance due to the seller (the “cash proceeds of sale”), conveyancer will place amounts in either a debit or credit column on the statement of adjustment
a “credit” is an amount that has already been paid or is own to the party, while a “debit” is an amount that will have to be paid upon completion
on statements of adjustments, the terms “debit” and “credit” are used in a manner that is different from their use in accounting
commissions calculation
he seller will pay this amount (this will show up on the sellers statement of adjustments)
example 2
7% of the first $100,000 of the purchase price AND 2.5% on the remainder $850,000
7% on first $100,000 + 2.5 % on $850,000
.07 X 100,000 + .025 X $850,000
$7,000 +$21,250
$28,250 (will only show up on the sellers statement of adjustments as a DEBIT)
commissions calculation
he seller will pay this amount (this will show up on the sellers statement of adjustments)
3.25 % on the first $100,000 of the purchase price AND 1.25% on the remainder $850,000
3.25% on first $100,000 + 1.25% on $850,000
.0325 X 100,000 + .0125 X $850,000
$3,250 + $10,625
$13,875 (remember there is also GST on this number that will be paid by the seller)
what is property transfer tax (PPT)
the property transfer tax act requires that a land transfer tax be paid to the provincial government by all buyers upon registration
the property transfer tax may not be mentioned in the question but the students must include in their statement of adjustments calculations
who pays property transfer taxes on the sales of home (buyer or seller)
buyers
what are the exemptions to paying the PPT:
a principal residence from one spouse to the other spouse, if a written separation agreement or divorce court order
first time home buyer
first time home buyers program in british columbia (only for properties less than 0.5 hectare (1.24 acres)
a buyer will be eligible if he or she:
will use the property as the buyers principal residence
is either a canadian citizen OR a permanent resident
has lived in British columbia for 12 consecutive months immediately before the date the buyer registers title to the property OR has filed 2 income tax returns as a british columbia resident during the previous 6 years
has never owned an interest in a principal residence anywhere in the world
has never received a first time home buyers exemption anywhere in the world
PPT Calculations
Home buyers in BC pay a provincial property tax (PPT) when they buy a home. The tax is charged at a rate of:
1% on the first $200,000 of the purchase price AND
2% on the remainder uptown and including 2 million AND
3% on amounts greater than 2 million
do these calculations…
sale price $195,000
sale price $1,125,000
sale price $3,845,000
sale price $195,000
1% on $195,000
= $1,950
sale price $1,125,000
1% on first $200,000 + 2% on $925,000
0.01 X 200,000 + .02 X $925,000
$2000 + $18,500
=$20,500
sale price $3,845,000
1% on first $200,000 + 2% on $1,800,000 + 3% on $1,845,000
$2000 +$36,000 + $55,350 = $93,350
what are the 3 important contract dates?
- completion
- possession
- adjustment
on a sample statement of adjustment what does
debit and credit mean?
debit: to pay
credit: to get
oh an adjustment statement, what are the items to be adjusted?
- sales price
- deposit (to buyers brokerage trust account) and deposit ( directly to seller )
- conveying fees (buyers legal fees) and legal fees (sellers legal fees)
- commission/PPT
- trade/rent/oil in the oil tank
for balance due to complete (buyers) do you subtract credit or debit?
credit
