What You Need to Know About Selling Your House.
Are you selling a home in Alberta for the first time? Or maybe you haven’t sold for a while or perhaps you are selling an investment property? Exciting! There’s a lot to know about what makes a successful sale. Read on.
Selling is different from buying (obviously), so if you’re a new buyer then make sure to check out the blog post I dedicated to purchasing your first home. Buying is all about the details of the new home, new mortgage, and contract. Selling your home is different. Selling is, ultimately, a focus on money. What money? Your money, the money you get from your sale. As the real estate lawyer for you, the seller, I think of myself more as a money manager; better yet, a fierce money tiger or money watchdog. There is a lot to do on any sale, but my primary job is to make sure you get paid! The buyer does not get keys to your home until we have every penny of your sale money in our trust account.
My law firm, Field Law, is located in Edmonton, Alberta. If you are in Edmonton, great! If not, still great! Why? Because if you are anywhere else in Alberta or out of province, really anywhere else in Canada, Field Law will help you sell your Alberta home or investment property. We help sellers all across Canada on a regular basis.
The start of this process is your decision to sell your home. Most folks then do some Internet searching to check prices and probably find a realtor to help you sell. You and your realtor work together to figure out pricing, timing, and other sale issues finishing off with you signing the realtor’s listing contract. We’ll return to some of the potential legal issues later in this blog post. Then, you get your home ready to sell: cleaned up, repairs done, and generally as attractive as possible.
Buyers make conditional offers, and you choose which one to accept. Once the buyer’s conditions are removed, congratulations, you have a deal! Now what? What are the next steps in selling your property (house, duplex, condo, townhouse, loft, acreage, etc., but also investment real estate, too)?
It’s always great to have a signed, unconditional contract, but, as you are most likely aware, there is still work to do. You may have some idea that you need a lawyer, but how does a lawyer fit in? What else must you do or know? Let’s start by reviewing the steps in your home selling process. Then, we’ll discuss some of the potential issues you need to work on with your realtor. Finally, we’ll move on to the steps and important info that apply after you have an unconditional sale contract.
Review: Initial Steps for a First-Time Home Seller in Alberta
- Decide to sell
- Find a realtor, discuss issues, and sign a listing agreement
- Prepare/stage your home so it looks its best
- Find buyers and accept an offer to purchase
- When buyer removes all conditions, you have a deal!
- Get ready to move
Important Issues to Discuss with Your Realtor
Most folks choose a realtor and sign a listing contract. You might decide to sell without a realtor. Your obligation as seller, with or without a realtor, will be to meet the seller’s contractual obligations as set out in the real estate purchase contract. Most realtors will use the standard form Multiple Listing Service (MLS) contract approved by the Alberta Real Estate Association (AREA) and often referred to as the standard contract or AREA contract.
The most recent AREA contract from July 2017 has been substantially changed from the 2014 version. There are brand-new seller obligations to understand along with classic seller obligations. Let’s talk about the classic seller obligations first and then move on to the new contract changes.
Three Classic Contractual Obligations for Real Estate Sellers in Alberta:
- Real Property Reports:
For a house and bareland condo (not a regular condo) you must supply the buyer with what is known as a Real Property Report (RPR). The exact words in clause 10.2 of the July 2017 version of the MLS contract are, “… An RPR showing the current improvements on the property… with evidence of municipal compliance or non-conformance…”Seller’s inability to deliver their contractual RPR requirement is the single biggest cause of problems and delays in the sale process. It doesn’t have to be that way. Show your realtor and/or lawyer what you have for an RPR & compliance. If you and your realtor or lawyer are confident you can meet the contractual requirement as set out above, no worries. If you are still puzzled or need more info, check out my recent blog post: Selling Homes in Alberta and Real Property Reports.
- Land Titles:
Prior to meeting with you to sign the listing contract, most realtors will get an up-to-date copy of the title to your property. Review that title with your realtor. Your obligation is to discharge all financial obligations. What you are looking for in your title review is any financial obligation. It’s OK for your current first mortgage to be on title because you will pay it out from sale proceeds. The most common problem is to see another mortgage that you know has been paid out (perhaps from a previous lender) but is still on the title. Less common, but still a concern, is your title might show lawsuits or financial claims relating to lawsuits or perhaps tax arrears being claimed by your local municipality.I am always surprised how many times an old mortgage turns up on the title: debts paid out long ago but still undischarged, still there on the land title, ready to cause you trouble. Your immediate, urgent, and important job is to deal with the previous mortgage lender to confirm you paid out and to get a discharge of that old mortgage. Clearing title can be time-consuming—especially if you paid out, for example, 10 years ago. Records can be hard to find; if your lender can’t find them, you have to reconstruct the payout. Blemishes on title will certainly delay your closing if you don’t get them discharged.
Section 6.1 (b) of the July 2017 contract states, “the seller is not a non-resident for the purposes of the Income Tax Act (Canada).” If you are a non-resident, the buyer is entitled to withhold at least 25% of the sale price until you provide the buyer with a Certificate of Compliance from the Canada Revenue Agency (CRA) stating that, as a non-resident, you have paid all the tax (including tax on rental income, if any) relating to the sale of your property. It can take months, sometimes up to 6–8 months, to get that Certificate of Compliance. In the meantime, the buyer is holding 25% of your sale proceeds. This can create huge difficulties if you need all your sale proceeds to buy, for example, your new home. Further, you may not be able to clear the title of financial encumbrances because you need your entire sale proceeds to take care of your contractual obligations.Non-resident tax issues are tricky and time-consuming. If you are a non-resident home seller, check with your accountant straightaway before proceeding. Make sure your realtor knows. Call us immediately at Field Law to discuss your next steps in avoiding a lengthy delay in receiving your full sale proceeds.
Summary: Ultra-important Alberta Home Selling Issues to Address
- Real Property Reports and compliance,
- Land titles and encumbrances
- Canadian residency and tax status
To avoid delays, get on to these Alberta home selling issues early on in the process. The best time is when you are sitting down with your realtor to sign the listing contract. Most listing contracts make mention of these three issues. Good realtors are aware of them and will help you either tick them off your list as non-issues or help you work your way through these issues so they do not delay your closing, cause you problems, and probably create a larger legal account. Why pay your real estate lawyer more money if you don’t have to? 🙂
Brand New Changes in the July 2017 AREA Purchase Contact
In July 2017, Alberta realtors began using a new contract substantially different from the old contract. There are at least 10 major changes from the previous contract. If you bought your home before mid-2017, then you need to be prepared for things to be different when you sell. Your realtor will help you understand the contract. Read a Quick Guide for sellers on the new AREA contract or delve into all the details with this longer blog and podcast.
Next Steps with an Unconditional Real Estate Purchase Contract:
- Selling a home and buying a new one at the same time?
This situation is known as a co-incidental completion, (that is, you are selling your current home and buying a new home at approximately the same time). Most folks need the money from their sale to buy their new home. If that is your circumstance, especially if your new purchase is on the same day or earlier than your sale, it is always difficult and sometimes impossible to get your sale money early enough on the completion day to then use those sale monies to complete your new purchase. Sale money has to be received, receipted, deposited to your lawyer’s trust account, and then used for your new purchase. There are a lot of steps administratively and it all takes time. Sometimes a sale is delayed. There are lots of reasons for delay. Don’t be caught not being able to complete your new purchase on the day you expect to complete. The solution is to speak to your lender well ahead of time and organize what is called ‘bridge’ or ‘interim’ financing. A co-operative lender will help you with a loan secured by your sale proceeds. With this loan, you close on your new home. When the sale of your existing home closes, you use the sale proceeds (actually your lawyer does it for you) to pay back your bridge loan. It’s not too expensive to do this; huge peace of mind for you.
You still have more documents to sign, but they won’t be ready immediately. Don’t leave town unless you check with your lawyer first. At Field Law, we like to get you in as soon as possible before the closing date. Then we can send all the paperwork to the buyer’s lawyer, putting the onus on them to close on time. Always better to be ahead of the curve.
- Your Sale Proceeds
Real estate purchase contracts call for the buyer’s lawyer to deliver closing funds to the seller’s lawyer on or before noon of the completion date. On receipt of sale proceeds, the trust cheque gets deposited in the seller’s lawyer’s trust account. Once that is done, your lawyer is in a position to pay out your old mortgage, realtor’s commission (if any), and any other items you have directed to be paid. At Field Law, if we get your sale proceeds before noon, then we do our best to get you your net sale proceeds cheque in the afternoon. If the sale proceeds arrive in the afternoon, then you generally will receive your net sale proceeds the next business day. If the buyer pays us after 12:00 PM on the completion date, they must pay late interest pursuant to the contract.
- Home Insurance
Do not cancel your insurance until your sale has closed and you have your net sale proceeds. If there are any delays in closing, you don’t want to get caught without coverage in the event of an emergency or disaster.
You can schedule disconnection of your utilities by advising your utility providers. Be careful in winter months about cutting off power and gas before you know your transaction has closed.
- Change of Address
The number of people and services that need to know you have moved can be surprising. The big ones are financial institutions (bank and credit card) and various branches of government (health, tax, driver’s license), but don’t forget about friends and family, too!
- Miscellaneous (but Important!)
School changes, health care providers, neighbourhood associations; there are lots of other things to think about, depending on your personal situation.
- Moving Day
Moving yourself or hiring a mover? If hiring, do lots of research on potential movers to find someone who is reliable. If doing it yourself, you probably want to rent a large truck so you can do the move in as few trips as possible. Either way, book in advance to make sure you can pick a date that works for you.
For further reference, CMHC (link) and Century 21 (link) both have their own helpful checklists for moving to a new home. The most important things are to start early, have a plan, and work on it a bit at a time. A big move like this doesn’t happen in a day!
The Role of Alberta Real Estate Lawyers and FAQ
First-time home-sellers (and home-buyers, too) have a long list of things to do. We get that! As you are working on your next steps, your team still has work to do. Your lawyer and realtor continue to work together behind the scenes to make sure that your deal closes smoothly. Check out my blog post about all the things your real estate team does for you, as well as a list of frequently asked questions on buying or selling a home in Alberta.
For all your real estate legal needs in Alberta, talk to Barry McGuire!
“House, Property, Real Estate For Sale Sign” image by Mark Moz used under CC Attribution 2.0 Generic.