Real Estate Basics

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Showing posts from January, 2022

Mortgage Payment Options

- January 31, 2022

A lot of people get a mortgage when they buy a property, especially when mortgage rates are so low. What options does a borrower have to pay the mortgage and which option benefits a borrower more? Generally, more frequent payments create substantial interest savings and reduce the loan’s amortization period. We discuss three options here: monthly payments , biweekly payments and accelerated biweekly payments . Biweekly payments are popular since they match most people’s earning frequency. What is the difference between biweekly payments and accelerated biweekly payments? Biweekly payments are constant payments that are paid every two weeks. Accelerated biweekly payments are constant payments that are equal to ½ of the regular monthly payment and paid every two weeks. We use an example to illustrate three options. A mortgage loan of $200,000, interest rate 2.39%, calculated semi-annually, not in advance. Amortization period of 30 year, and a term of 5 year. Option

Simple Real Estate Market Analysis

- January 30, 2022

Before people think about buying or selling properties, the first thing people would like to know is how the market is doing? It would give people an idea whether they should do something in the real estate market. We often hear about “buyer’s market or seller’s market”. What data would indicate a market’s feature? Buyer’s market : At present rate of sales, if the available inventory will be sold out over 7 months, it’s buyer’s market. Also, we can use sale to active listings ratio. If the ratio is less than 12%, it’s buyer’s market. Seller’s market : At present rate of sales, if the available inventory will be sold out less than 5 months, it’s seller’s market or sale to active listings ratio on or over 20%. Balanced Market : There is between 5-7 months’ worth supply or sale to active listings ratio is between 12-19%. Also, another term can help to explain a market – Days on Market. This is the number of days between the listing date and the date a contract is entered into.

Property Title Search Terminology

- January 29, 2022

When we buy a property, it’s very important to understand all terms in a title search. Here are some explanations of terms. Legal Notations : Legal notations are not encumbrances, but document other types of interests or legislative matters or restrictions that affect the property, (sometimes to the “benefit” of the title being reviewed). Easements: An easement is a right to use a neighbouring property in a specific way for the benefit of the holder’s land without possessing it. The land that benefits from the easement will be registered as Legal Notation on the title. The land that burdens from the easement will be registered as a charge against title. Easements run with the land Statutory Rights of Way : Statutory rights of way are rights that a municipal or industrial users has over certain lands. The most common example of statutory rights of way include statutory rights of way in favour of municipalities to maintain sidewalks and other public access over lands, statutor

Speculation &Vacancy Tax and Vancouver’s Empty Homes Tax

- January 28, 2022

The speculation and vacancy tax is an annual tax paid by owners of residential properties in designated taxable regions of BC. It only applies to properties classified as residential that are also in designated taxable regions. Registered owners of residential property in a designated taxable region must complete a declaration EACH YEAR to declare their residency status and how their property has been used. If a property has more than one owner, each owner must declare separately even if the other owner is spouse or relative. Declaration timeline is: Receive declaration letter mid-January to mid-February Declare by March 31 (declare how you used your property last year. If asked about your income, use income from the year before last year If you owe tax, pay by the first business day in July. The designated taxable regions include Capital Regional District, Metro Vancouver Regional District, City of Abbotsford, District of Mission, City of Chilliwack, City of Kelowna, City of W

Property Transfer Tax

- January 27, 2022

People have to pay property transfer tax when they buy a property. This would be added to the purchase price. The property transfer tax is based on the fair market value of the property. The rate is : 1% of the fair market value on the first $200,000 2% of the fair market value between $200,000 and $2,000,000 3% of the fair market value between $2,000,000 and $3,000,000 5% of the fair market value greater than $3,000,000 For example: fair market value is $3,500,000, tax payable would be: 1% on the first $200,000 = $2,000 2% between $200,000 and $2,000,000 = $36,000 3% between $2,000,000 and $3,000,000 = $30,000 5% over $3,000,000 = $25,000 Total property transfer tax: $2,000 + $36,000 + $30,000 + $25,000 = $93,000. More detail, please visit https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/calculation-examples There is an additional tax applied for foreign nationals , foreign corporations , and taxable trustees in the Capital Regional District,

Property Tax

- January 26, 2022

Homeowners are responsible to pay a property tax each year. How is the amount you have to pay calculated? The amount you pay for property tax is based on two factors; the property tax rate and the property’s assessed value. The property tax rate is calculated based on an annual budget required to fund important services used every day in the community. Also, if a property assessed value is over $3 million, an additional school tax rate is applied. The assessment value is set by B.C. Assessment and published yearly. When the property’s assessed value changes, it may affect your property tax. However, it doesn’t mean property tax will increase once your property’s assessed value goes up. The most important factor is not how much assessed value has changed, but how assessed value has changed relative to the average change for your property class in your municipality. If your property’s value is lower than the average change for the property class, your property tax will likely decr

Property Assessment Value

- January 25, 2022

People who own a property in BC receive a BC assessment notice in January each year. It provides an assessed value based on the market value of the property as of July 1 of the PREVIOUS year. In determining the assessed value, the property’s unique characteristics are considered, including: The location and size of the home The view from the home Land surface Age and condition of property Comparable sales prices and other real estate market information If you believe information on your notice is incorrect, first thing you do is to contact local BC Assessment office and discuss your concerns. The assessment may be corrected without an independent review. However, if your concerns are not satisfied, you file a complaint to the Property Assessment Review Panel (PARP). The deadline is January 31 of each year. PARP hearings take place between February and March 15 each year. The next level of appeal is to the Property Assessment Appeal Board (PAAB). You can appeal to the PAAB only af

Strata Depreciation Report

- January 24, 2022

A depreciation report is an estimate of the repair and replacement cost for major items owned by the strata corporation and the expected life of those items. It outlines the common property assets, their expected life and their replacement costs. It gives a strata corporation a tool to address the necessary costs to maintain common property and assets when they age. It forces the strata corporation to be proactive in repair and maintenance, as well as financial planning. Since the owners of strata units are partially responsible for the common property, it’s very important for the owners to know how much repair and replacement work is required, what the approximate costs are and when the costs will likely occur. For potential buyers, knowing what the state of the physical assets are of the property, understanding where the contingency reserve fund and special reserve fund is in terms of adequate preparation of short and long-tern maintenance would give them an idea of whether they wi

Strata Documents

- January 23, 2022

When potential buyers review strata documents , there are some key terms they should be aware of. Strata Fee Strata fees (or maintenance fees) are monthly contributions by the owners to cover the strata corporation’s operating expenses and any contribution to the contingency reserve fund. Common Property Any part of the land and buildings shown on the strata plan that is not part of a strata lot is common property Special Levy An additional contribution applied against owners by the strata corporation, usually for unexpected expenses. Contingency Reserve Fund A fund maintained by a strata corporation for common expenses that usually occur less often than once a year. Bylaw and Rule Bylaws serve as the strata corporation’s constitution. The bylaws govern the owners’ obligations, including the use of their strata lots, the common property and common assets, and administration of the strata corporation. Rules are informal regulations made by strata councils to govern the use, safety

Strata Properties

- January 22, 2022

Condominiums When people buy a condominium or townhouse, they don’t buy an individual lot only. They get a privately owned strata lot and common property. What is strata? The strata concept allows the subdivision of a building into separate parts for individual ownership, together with sharing ownership and use in the common property. For condominiums, parking stalls and storage lockers may be part of individual strata lots or may be common property. It depends on strata plan’s arrangements. Therefore, buyers need to pay attention to them. Since strata lot’s owners share ownership in common property, we have to understand how strata corporation works. A strata corporation is created by the developer. The owners of the strata lots are the members of the strata corporation. If someone sues and obtains a judgment against a strata corporation, it serves as a judgement against all owners. Each owner is liable to pay his or her share of the judgement. The strata corporation’s duties a

Life Tenant

- January 21, 2022

A friend of mine told me her friend’s situation with a property one day. I think it may be an interesting topic to some people. To make thing easier, let’s name a couple "A" and "B". "A" was married to "B" who was much older than her. "B" has a daughter. "B" would like "A" to still live in his house after he dies, but pass the ownership to his daughter. Regarding the situation, "B" should make a will which create a life estate in favour of "A", with the remainder of B’s house going to his daughter. After "B" passes away, his daughter would appear on the certificate of title as owner, A’s life estate would appear as a charge. What is a “life estate”? A life estate is an estate in land that lasts for the lifetime of the holder, who is called a life tenant. A life tenant is entitled to all the rights of use and possession of the land, and received any revenues. But a life tenant doesn’t

Property Co-Ownership - Joint Tenancy and Tenancy in Common

- January 20, 2022

When more than one person buys a property together, there are two types of ownership: Joint Tenancy and Tenancy in Common . What is Joint Tenancy ? Two or more people own an undivided interest in a property. They are viewed as a single legal owner. When one joint tenant dies, the entire estate automatically vests in the surviving joint tenants. The result is that the surviving joint tenants gets the whole of the estate until there is a sole survivor. Joint tenants can’t leave their interests to anyone in their wills. However, a joint tenant can sell, mortgage or lease his/her own interest freely without requiring the consent or knowledge of the remaining co-owners. Also, a joint tenancy can be terminated What is Tenancy in Common ? In a tenancy in common, each co-owner holds a separate ownership share in the property. Tenants in common may have different shares in the property. There is no right of survivorship in a tenancy in common. A tenant in common may leave his or her

Freehold and Leasehold Ownership

- January 19, 2022

When we look for a property, we often see the words “ Freehold” or “Leasehold”. These words represent types of ownership. Let’s go through the terms together. Freehold Base on the Real Estate Council of British Columbia’s definition, “ freehold” means the owner of the freehold interest has full use and control of the land and the buildings on it, subject to any rights of the Crown, local land-use bylaw, and any other restrictions in place at the time of purchase. Why are Crown, local land-use bylaws mentioned? In Canada, the Crown ( ie: Federal or Provincial government) is the only absolute owner of land. When we speak of “ownership” of a real property, it’s about a right to possess and use land for a period time. Freehold ownership has a right to possess and use land for an unlimited time. Leasehold Leasehold ownership has a right to possess and use land for a limited period of time. Leasehold properties have a lease term of at least 50 years, but are frequently for a period of 99

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