An Agreement of Purchase and Sale states that the balance of the purchase price on the closing date will be paid by certified cheque, subject to the usual adjustments. The certified cheque required from purchasers by the law office for closing will include any such ADJUSTMENTS payable on closing.
A) Adjustments between Purchaser and Vendor (Resale) On a resale home, adjustments consist of items already prepaid beyond the closing date by the seller that benefit the purchaser after the closing date. Credit is given to the seller as an adjustment on closing. Some examples of closing adjustments on a resale home include items such as:
B) Adjustments Between Purchasers and Builders (New Construction) On a new home purchased from a builder, closing adjustments are referred to in the terms of the Builder’s Agreement. Builder closing adjustments are typically greater than on a resale home, since adjustments when buying from a builder can include items that are not normally adjusted for when buying resale, such as:
When purchasing a condo unit from a builder, there are important factors you should be aware of...
1) SURPRISE CLOSING COSTS
2) ROOM SIZES AND SQUARE FOOTAGE
3) DOES A BUYER GET INTEREST ON DEPOSITS WHEN BUYING FROM A CONDO BUILDER?
Beginning July 1, 2010, a sales tax of 13% known as the Harmonized Sales Tax (HST) was implemented to replace the 5% GST (the federal Goods and Services Tax) + the 8% PST (Provincial Sales Tax). In Ontario, the PST will only continue to exist separately from the HST with respect to some insurance premiums. Here are 12 different real estate matters which may or may not be affected by HST: Mortgage Brokerages
DID YOU KNOW? Qualified buyers may borrow INTEREST FREE for 15 years from your RRSP savings. You are allowed to borrow up to $25,000 per buyer ($50,000 per couple) towards the cash down payment on the purchase of a residence. Banks often discourage clients from going this route when purchasing a residence, because banks want buyers to borrow and pay INTEREST, rather than borrowing interest- free against their RRSP, which does not benefit the bank in any way. The VERY best investment for one’s RRSP is the purchase of a principal residence which, in time, will generate a TAX FREE capital gain! TO QUALIFY FOR THE RRSP HOME BUYER PLAN: 1. FIRST TIME HOME BUYER
As of January 27, 2009, first-time home buyers may be eligible for an income tax credit for their closing costs. However, “first-time home buyer” can be misleading. Please consider the following: WHO: An individual is considered a First-Time Home Buyer if neither the buyer, or his/her spouse or common law partner owned and lived in another home in the calendar year of the home purchase, or in any of the four preceding calendar years. WHAT: The First-Time Home Buyer Tax Credit provides a credit on a maximum of $5000 for home purchase costs (including legal fees, land transfer taxes etc), meaning maximum tax relief of $750. The individual/couple MUST intend to occupy the property within one year of the purchase to receive the credit, meaning it does not apply to properties purchased as investments. WHEN: The First-Time Home Buyer Credit is claimable for that taxation year in which the home is acquired. WHERE: The First-Time Home Buyer Credit applies to properties purchased within Canada only. WHY: The First-Time Home Buyer’s Credit was originally introduced as part of “Canada’s Economic Action Plan” to assist. For more information, contact Service Canada at 1-800-662-6232. In Canada, as of June 23, 2008, sellers who are listing a property for sale and buyers who are signing an offer to purchase are now required to show one piece of photo identification at the time of signing. The real estate salesperson or broker is required to fill in a form called the “Client Information Record” with details from the photo ID, as well as the person’s occupation. This information must be retained by the Real Estate Broker’s company files as a private record for FINTRAC review, if necessary. FINTRAC refers to the Financial Transactions and Reports Analysis Centre, an administration tasked with enforcing the requirements of The Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This federal law applies not only to real estate brokers, but also applies to the banking industry, life insurance companies, security deals, foreign exchange businesses, accountants and casinos. Worldwide, it is established that the equivalent of $500 BILLION (US) is laundered each year. Most industrialized countries over the last several years have established new laws in order to fight both money laundering and suspected terrorisst financing activities on both the domestic and international levels. To find out more about Canada’s laws on money laundering and terrorist, please visit FINTRAC’s website: www.fintrac.gc.ca or call toll free at 1-866-346-8722 TITLE INSURANCEThe Law Society of Ontario requires all lawyers to inform clients about title insurance and it’s advantages when acting for purchasers. Although Title Insurance has been standard in American real estate transactions, such insurance has gained popularity in recent years as part of the typical Ontario residential real estate purchase transaction.
WHAT IS TITLE INSURANCE? Title Insurance is an insurance policy covering the condition of title or ownership of real property at the time the policy is issued, and is used to provide ownership protection for a purchaser against losses or damages suffered as a result of title problems. Title Insurance is typically obtained by the purchaser’s lawyer prior to closing the purchase for their client’s benefit. Title Insurance does not replace the role of the purchaser’s lawyer. Rather, it provides an added level of protection for the purchaser. Ontario lawyers still must search title and certify the status of title before a Title Insurance Policy can be issued. NON INSURED TRANSACTIONS: In the past, Ontario purchasers relied solely on their lawyer’s “legal opinion” that the property purchased had a “good and marketable title”. Unfortunately, no lawyer can completely assure a purchaser that there is absolutely no chance of an error in the government records, that there are no undisclosed claims, or that what appears to be the signature of the prior owner or consenting spouse is a true signature and not fraud or forgery on title. Title Insurance can satisfy such “gaps” in a lawyer’s opinion to cover not only frauds or forgeries prior to closing, but after closing as well. THE BOTTOM LINE: Title Insurance is golden for the consumer, as it can be included in a purchaser’s total legal costs when one considers typical total legal fees and expenses. In addition, because it is a form of NO-FAULT CERTIFICATION of clean title with (typically) NO DEDUCTIBLE, it has more extensive coverage that the certification of title that has traditionally been provided by lawyers in real estate transactions. Although several insurance companies have title insurance policy programs, the Law Offices of Stephen Shub are pleased to recommend to all of our clients the PLATINUM TITLE INSURANCE POLICY by First Canadian Title Insurance Company. Our confidence in First Canadian’s Platinum Title Policy is greatest due to this company’s strong status as one of the largest world-wide title insuring companies with one of the highest available insurance company ratings and substantial local Canadian infrastructure. They are quick and efficient in the issuance of policies as well as the processing of any claims. TYPICAL RESIDENTIAL POLICY COVERAGE: For a one-time premium (included in our quotation for fees and legal expenses), the policy protects the purchasers against losses suffered from matters set out below, as well as other matters more specifically outlined in the policy:
TYPICAL COST: For residential real estate transactions with a purchase price of less than $500,000.00, a policy can be purchased for $150-299, depending on the type of residential property and whether there is a mortgage. Once a Title Insurance premium has been paid, unlike other types of insurance, there are no annual renewal premiums to be paid. Once the Title Insurance Premium has been paid, there is no reason to pay again, no matter how many years one might own the property. QUICK CLOSINGS: When a vendor or purchaser wishes to close a transaction quickly, a Title Insurance Policy is often the best option. By eliminating some of the procedures otherwise required, a Title Insurance Policy can facilitate closings on very short notice. 1. Assignment Sale is Different from a Resale Purchase Purchasing an assignment sale condo, in essence, is purchasing the ownership of the Agreement of Purchase and Sale contract from the original buyer. Your title will not go on the property until the Final Closing Date. 2. Be Sure You Have Enough for Down Payment Making an assignment sale purchase usually involves a larger amount of upfront cash compared to a resale purchase. This is because now you are responsible for two things at the assignment closing: a) The down payment paid to the builder by the original buyer which is usually 20% of the original purchase price. b) The difference between the new purchase price (the current asking price) and the original purchase price from the builder. Therefore, if you are looking to pay less than 20% down payment for your purchase, assignment sale home may not be the best choice for you. Here’s an example: An assignment sale with current asking price of $300k, the original contract purchase price was $250k, and a 20% down payment paid to builder from the original home buyer. In this scenario, down payment required upon this assignment closing will be $100k. Calculation: ($300K assignment asking price – $250k original contract purchase price) + ($250k original contract purchase price x 20% down payment paid to builder) = $100k. 3. Builder’s Consent is Required Most assignment sales would require the builder’s consent before you can complete your assignment sale transaction. In some cases, builders may not grant the consent if the assignment sale closing date is too close to the final closing date. Since the final closing date is the point at which ownership is transferred from the builder to each individual condo owner, the builder (and their lawyers) will want the transaction of assignment ownership to be secured well in advance so that they’ll know the final, correct name for the contract. 4. Mortgage & Mortgage Approval Following on the last tip, for the builder to grant a Builder’s Consent you will need to provide a confirmation for Mortgage Pre-approval or Proof of Sufficient Funds to show that you can afford to complete the sale. Remember, only the original contract purchase price minus the down payment paid to the builder is eligible to apply for a mortgage. Example: Adopting the same scenario from above, $250k original contract purchase price – ($250k x 20% down payment paid to builder) = $200k is eligible to apply for a mortgage. 5. Understanding the Closing Date Buying an assignment sale condo is similar to purchasing a pre-construction project, but there are a few different closing dates that you should understand. In general, an assignment closing date could be before or after the Occupancy Closing date. a) Assignment closing date: This is the date that your assignment sale transaction is completed with the original home buyer (assignor). b) Occupancy closing date: The occupancy closing date is the first closing date that the home buyer obtains the property key from the builder and lawyer. At this point, the home buyer is still paying occupancy fees to the builder and not yet paying into their mortgage. c) Final closing date: This is the final date that the property title will change to the buyer’s name and the buyer is now paying into their mortgage. 6. Find Great Support to Achieve Great Result Purchasing an assignment sale condo can be very complicated. If you’re interested in pursuing an opportunity in this type of transaction, we highly recommend you work with an experienced Professional. |
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