One of the major influences in today’s real estate market is the foreign buyer. So buyers and sellers who are buying in Canada or the United States need to know a few things before they make their move. Real estate is a very big investment, but before you move ahead, here are ten things that you need to know.
#1 Multiple Listing Service
Canada and the United States have what is called a Multiple Listings Service. That means that you can work with one agent who can show you all the listings in his office or her office and they can also show you listings that belong to other companies. So there is no need to shop for a number of agents: you can use one agent, and that agent can show you as many properties as you would like to see.
#2 Listing Agent
Sellers enter into a contract to list their properties for sale with one agent, called the listing agent.
#3 Buyer Agency Agreement (Buyer Representation)
Buyers can enter into contracts with what we call a Buyer Agency Agreement (buyer representation). This means that the buyer agent’s fiduciary duty is to you as the buyer. That means that they have to protect your interests, they have to make sure they have all the information, and they are on your side in a number of transactions. So buyer agency and buyer representation are very important in North America.
#4 Funds On Shore
Make sure that you have funds transferred into a Canadian or a U.S bank, so you are ready to move ahead with a transaction if you see something you like. You need to make sure that your funds are on shore before you make any sort of deposits or down payment and transactions. Don’t expect that your funds can be transferred within a day or two. They should be in North America and ready for the purchase.
You will need a deposit. A deposit is cash or certified funds, and that money has to go into a bank account with the listing brokerage. The deposit is between 5 per cent and 10 per cent of the purchase price and should be fairly accessible from your bank account and to the trust fund of the listing company.
If you need financing, you will have to be pre-approved by a bank with branches in Canada. There are a lot of foreign banks in Canada and you can use them, but the process will be much easier if a lot of your assets are already transferred into Canadian funds or in a Canadian bank, or in U.S funds in a U.S bank.
#7 Land Transfer Tax
Buying property in Canada and the United States is like buying property in many other places — there are taxes to pay. Here, we have taxes on the property that are paid yearly. There are also taxes that are paid when you actually buy the property. And in Toronto at the moment, there are two taxes to pay. One is a 2 per cent tax on the purchase price that goes to the province and the other is a 2 per cent tax that goes to the City of Toronto. You have to be prepared to pay to these taxes on closing.
#8 Property Tax & Withholding Tax
Owning property in Canada and the United States means that you will have to pay property taxes. Taxes on most properties are a factor of the size of the property and the value of the property. Here, the tax is based on a percentage of the value of the property. And usually, that is 1 per cent of the value of the property you pay in taxes per year. But that is a figure you should keep in mind. When you sell your property, you will be subject to withholding tax, and that withholding tax will be relinquished once the government assesses your tax liability.
#9 Responsibility To The Mortgage
Please remember that when you buy a property in Canada and it’s financed and you have a mortgage, the mortgagee can go after you for all of the value of the mortgage that you’ve borrowed. So you are responsible to the mortgagee to pay that money back.
#10 Agreement of Purchase and Sale
Please note that an accepted Agreement of Purchase and Sale is a binding contract. It’s not something that you can walk away from, nor do I suggest you ever walk away from this. Buying in Canada has been very possible for a lot of people, and Canada is a very safe place to live — a very safe place to put your money. Please note that any time you buy a property in Canada, it comes with strong property rights. It is very hard for someone to take that property away from you unless you do not meet your financial commitment. Canada is a very strong, safe place to invest.