Selling a property in B.C. often begins with the property being listed for sale. Once an offer to purchase the property has been accepted by the Sellers, there is a binding contract to sell the property. From here, the Sellers must now retain legal services to complete the sale.
Items Sellers will want to consider are:
- Closing Costs
- Non-Resident Seller Procedure
At closing, there a few closing costs which Sellers need to take into consideration. These costs (if applicable) will come directly from the sale proceeds:
- Realtor Commissions
- The Seller is responsible for paying both realtors commissions. These commission fees for the buying and selling agent are subject to GST.
- Mortgage Payouts
- If there is a mortgage on the property, the mortgage will need to be paid out in full. This mortgage payout will include any prepayment penalties that are applicable under the mortgage terms. Sellers should contact their mortgage broker prior to selling the property to determine how much these prepayment charges will be in order to avoid any unwelcome surprises at closing.
- Deferred or Delinquent Property Taxes
- Any deferred or delinquent property taxes will need to be paid out of the sale proceeds in order for the transfer to occur to the new Buyers.
- There will be adjustments given as either debits or credits that pro-rate for property taxes, strata fees, municipal utilities, and if the property is tenanted, rental income and security deposits.
- Legal Fees for a sale (including the discharge of one mortgage) usually range from $800-$1,100, regardless of whether you retain the services of a lawyer or notary public.
To avoid liability for non-resident Sellers’ unpaid taxes, purchasers must withhold a portion of the sale proceeds until a non-resident Seller has provided a Clearance Certificate from the Canada Customs and Revenue Agency. The holdback is normally 25% of the purchase price, but could be higher depending on the use of the property.
A non-resident Seller should retain the services of a tax professional to assist in obtaining a Clearance Certificate. This should be done as soon as possible as the process can take six to eight weeks. Under circumstances where the holdback would not leave sufficient funds to payout an existing mortgage at the closing of the sale, a Seller can claim hardship to expedite the issuance of a Clearance Certificate. A Clearance Certificate will only be issued once the tax is paid. Canada Customs and Revenue Agency will review the particular sale transaction to determine whether or not capital gains tax is payable, but will also require payment of any other taxes outstanding or payable by the Seller.
The Seller can claim certain expenses in determining the adjusted cost base including: Property Transfer Tax, Provincial Sales Tax, legal fees on the original purchase, and any capital improvements made, including strata assessments. The commission, tax and legal fees on the sale are not deductible for purposes of calculating tax owing at the time of the sale. The Seller can claim these expenses by filing a Canadian tax return subsequent to the sale.
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