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Contract of Purchase & Sale Explanation for First Time Vancouver Home Buyers

Episode 7 of the First Time Home Buyers Guide was an overview of the Contract of Purchase and Sale. Now we’ll start going through the offer in detail starting with price!

Section 1 – Price!

Many first time home buyers think a real estate offer to buy property in Vancouver is a simple document that only is about price.

The widely held perception is that an offer has how much the Buyer is willing to pay and if the Seller accepts the Buyers price its a done deal. Not quite, as I will explain.

How Much?

In Section 1 on Page 1 of the Contract of Purchase and Sale below, you will see the Buyers proposed purchase price of $400,000.

In most cases, this is how much the Buyer is initially offering to pay. In some cases this price is accepted (But this does not mean the offer is accepted! More on this later!), but very often this part of the Contract changes several during negotiations, but we’ll get to that later.

The Price is Written Numerically & Alphabetically?

Yes! On section 1 of the Contract of Purchase and Sale, the price is written numerically and alphabetically so there is absolutely no confusion as to the exact amount the Buyer is willing to pay the Seller.

The Seller Accepts the Price, How do I Pay?

When you buy a product in a store you usually pay with cash or a card on the spot at the cashier and you’re on your way.

Property purchases tend to be the largest purchase most people make over the span of their lives. Not too many people have several hundred thousand dollars in cash in their bank account to pay for such purchases. For most first time home buyers, loans and mortgages need to be arranged and the money for the purchase needs to be turned over to the Sellers in a reliable, safe, lawful, and efficient manner. (duffel bags full of cash don’t quite fit the bill here)

Do I have to Pay as Soon as the Seller Accepts?

No, but the Buyer will have to pay a deposit within 7-10 days of an accepted offer that is generally 5% of the purchase price in Vancouver (More on Deposits in the next Episode). When the Buyer pays the purchase price is negotiable can happen any date the Buyer and Seller agree on. (More on this later as well.)

Page 1 Contract of Purchase & Sale BC Courtesy of Mike Stewart Realtor Page 1
Looking for Advice on Selling a Condo in Vancouver? Watch these Videos on How to Sell a Vancouver Condo!

Stay Tuned for First Time Home Buyer Vancouver Episode 9 – The Deposit! Coming Soon!

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This post is part of a series discussing Tips for First Home Buyers in Vancouver. Remember, there is no such thing as a stupid question! I strongly encourage questions and comments!

You’ve found your Dream Home, What next?

You finally found a property you want to buy and you have an idea of what its worth as discussed in Vancouver First Time Home Buyer Tips Episode 5.  You and your Realtor will need to draft up an offer in writing to signal to the Seller that you are serious about buying the property.

STOP! Time to for the Realtor Disclose EVERYTHING to the Buyer IN WRITING!

Before a Realtor can prepare an offer or Contract of Purchase and Sale as its officially referred to in British Columbia, several very important documents need to filled out and signed by the Buyer. These documents are a constant source of confusion and questions from First Time Home Buyers and its a major reason I created the First Time Home Buyer Guide for Vancouver.

What needs to be filled out and signed and what it means!

• Working with a Realtor – A home Buyer and their Realtor or Buyers Agent enter into whats called the Agency Agreement when they start to work together. This document lays out the obligations and duties the Realtor owes a Client and the Rights of the Client. The salient points of the Agency Relationship as laid out in the Working with a Realtor Brochure (the link to the left takes you to an example of the document and a video explanation) are as follows; 1) Undivided loyalty. The Brokerage must protect the principal’s negotiating position at all times, and disclose all known facts which may affect or influence the principal’s decision. 2) To obey all lawful instructions of the principal. 3) An obligation to keep the confidences of the principal. 4) To exercise reasonable care and skill in performing all assigned duties. 5) To account for all money and property placed in an Brokerage’s hands while acting for the principal.
• What It Means - The Realtor works for the Client (First Time Home Buyer) and only the Client, no matter who is paying the Realtor and has to tell the Client EVERYTHING! 2) The Client/Buyer is the BOSS! No ifs, ands, or buts! 3) The Buyers Real Estate Agent CANNOT talk about the clients affairs with ANYONE, unless given permission by the Client, 4) The Realtor has to do their job right or face serious consequences 5) Everything given to the Realtor is the Realtors personal responsibitiy ie deposit cheques, keys, anything.
• FINTRAC - Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) gathers, analyzes, assesses, and discloses financial intelligence and requires all Realtors in Canada to ascertain the identity of the their clients and submit it to FINTRAC. (the link to the left takes you to an example of the document and a video explanation)
• What It Means - Big Brother/the Government of Canada wants to know if buyers of real estate in Canada are funding terrorism or laundering money and wants all of the personal information of these Buyers and will throw these Buyers and their Realtors in jail for not giving this personal information.
• Disclosure of Remuneration - Realtors have a duty to disclose to their Clients in writing how the Real Estate Agent is getting paid, by whom, and how much. All Buyers working with a Realtor must initial or sign a Disclosure of Remuneration.
• What it Means – For First Home Buyers, the Disclosure of Remuneration is very often when they come to understand how their Buyers Agent gets paid. This is how it works: The Seller offers to pay their Sellers Agent (Listing Agent) a commission to sell their property. The Sellers Agent then offers about half of this commission to Buyers Agents to bring their Buyers to bring accepted offers that Complete. The Buyers Agent has to get it in writing that the Buyer is aware of how much the buyers agent is getting paid and by whom. PLEASE NOTE – Buyers do not pay the Buyers Agent! For a more detailed explanation of check out my Disclosure of Remuneration Video.

Once all these documents are signed and filled out its time to prepare the offer or Contract of Purchase and Sale, so stay tuned for Episode 7 of the First Time Home Buyer Tips Vancouver: The Contract of Purchase and Sale Overview!

I Strongly Encourage Questions and Comments!

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This is the first post in a series of videos with tips for First Time Home Buyers in Vancouver’s property market.

So you’re thinking of taking the plunge and buying your first home in beautiful Vancouver!

How much can I spend? Get Pre-Approved!

If you have several hundred thousand dollars in your bank account, great!

If not, you should speak to your bank or a mortgage broker to find out how large of a mortgage you can get. The bank or broker will give you a mortgage pre-approval which is a rough estimation of what you can borrow. This mortgage pre-approval is based on the information you provide the bank or mortgage broker. Remember, the more accurate and detailed the information you provide, the more accurate the pre-approval amount!

Here’s a list of mortgage brokers who can help you with a mortgage pre-approval:

Chad Watts 7787736631 cwatts@mortgagegrp.com

Rino Revel 604) 816-1976 rinorev@telus.net

Karli Shih karlishih@gmail.com 604-992-9891

Jessi Johnson (604) 716-6474 jessi@jessijohnson.com

Want to learn more about mortgages and real estate financing? Check out the videos on Vancouver Real Estate and Mortgages!

Now that you know what you can spend, its time to figure what that money can buy. Be sure to Check out Episode 2 of the Vancouver First Time Home Buyers Guide – Where to Buy!

If you have any questions, feel free to contact me at any time!

Mortgage Pre-Approvals are NOT Guarantees of a Mortgage!

I recently had the pleasure of interviewing Chad Watts of The Mortgage Group about mortgage pre-approvals. He brought up a very important point for Buyers, particularly First Time Home Buyers. And that is a mortgage pre-approval is NOT a guarantee that you will get a mortgage at the amount the Lender originally mentions or get a mortgage at all.

What is a Mortage Pre-Approval?

This is a preliminary estimation by a Lender of how much the Lender will loan you based on very basic information. This number is subject to change based on what property you get an accepted offer on and the details of your financial situation.

Why Your Mortgage Pre-Approval may not match the Mortgage You Get!

A mortgage pre-approval is a basic guideline of generally how much a Lender thinks they can give loan the Buyer. Once the Buyer finds their dream home and have an accepted offer subject to financing on the property they need to forward the offer onto the Lender. The Lender then begins to go over all the details of the property and the Buyers financial situation with a fine tooth comb. This is often where the disparities between the Mortgage Pre-Approval and the actual mortgage pop up.

Too Much Debt, Inaccurate Financial Information, Unpaid Taxes,  and Leaky Condos

There are certain buildings that Lenders will not lend money on for various reasons (Its a leaky condo, its not worth what the accepted offer says its worth, there are issues with title). Sometimes the information the Buyer originally provided the Lender is not accurate or out of date (Buyer is behind on their taxes, or doesn’t have as much money as they thought, or may have too much debt). Both of these variables can result in the Buyer either not getting a mortgage at all or not getting as large a mortgage as they had anticipated.

The CHMC has a cool tool that you can use to test your financial situation to see if you are ready for home ownership that you might find useful.

Totally off topic – Check out the Tightrope Walker in the background of the video!

I REALLY APPRECIATE COMMENTS AND I’D LOVE TO HEAR YOUR THOUGHTS!