Contract of Purchase and Sale in BC: A Guide for Buyers and Sellers

Buying or selling a home in British Columbia typically involves signing a contract of purchase and sale. This legally binding document outlines the terms and conditions of the real estate transaction. Understanding how these contracts work is crucial for both purchasers and vendors.

Key Takeaways

• The BC contract of purchase and sale states rights/responsibilities of buyers/sellers in a real estate transaction.
• Once signed by both parties, the contract becomes legally binding.
• Buyers can include subject clauses to confirm details about the property before removing conditions.
• Use addendums to add terms and follow all timelines stated in the contract.
• Include desired terms in writing since the contract supersedes verbal agreements.
• Seek guidance from a realtor or lawyer to ensure your rights are protected.

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What is a Contract of Purchase and Sale?

A contract of purchase and sale, also known as an agreement of purchase and sale or an offer to purchase, is the written contract that formalizes a real estate transaction in British Columbia.

It is jointly published by the Canadian Bar Association BC Branch and the British Columbia Real Estate Association (BCREA) and serves as the standard contract used across the province.

Key Components

The contract typically contains:

• Identities of the buyer and seller
• Legal description and address of the property
• Purchase price offered
• Amount of deposit
• Conditions the buyer requires to be met before the sale is finalized
• Timeline for completion and possession
• Adjustment date for property taxes and strata fees
• List of included and excluded items
• Expiry date for the offer
• Signatures of purchaser and seller

Legally Binding

Once signed by both parties, the contract becomes legally binding. The purchaser and seller must adhere to the terms and conditions or face legal consequences.

This means the seller must sell the home to the buyer at the agreed upon price barring any conditions, while the buyer must provide funds to complete the purchase.

When Does the Contract Become Binding?

In BC, the contract of purchase and sale goes through the following general stages:

1. The Buyer Presents an Offer

The purchaser’s real estate agent typically prepares the offer contract with the proposed terms and conditions. This constitutes an offer to purchase the property. The seller can then accept, reject, or negotiate the terms of the offer before reaching a final agreement.

Having a buyer’s agent can be beneficial in this process, as they provide expertise in drafting competitive offers and negotiating favorable terms. However, it’s important for buyers to understand the pros and cons of a buyer’s agent , such as gaining professional guidance but potentially paying commission fees.

2. The Seller Reviews and Responds to the Offer

The seller can accept, reject, or counter the buyer’s offer. If countering, they may ask for a higher purchase price or different conditions.

3. Negotiations Continue Until Both Parties Agree

The purchaser and seller go back and forth with offers and counter-offers until they reach a mutual agreement.

4. The Seller Accepts an Offer

Once the seller formally accepts an offer in writing, the contract becomes legally binding on the seller. They must now sell the property on the agreed upon terms unless the buyer fails to meet conditions.

5. The Buyer Removes Subjects

The buyer will work to satisfy any subjects or conditions within the stated timeline, known as the subject removal date.

6. If Subjects Are Removed, the Contract Becomes Firm

Once the buyer removes all subjects in writing by the removal date, the contract becomes legally binding on the buyer as well. The buyer must now complete the purchase.

Critical Sections of the Contract

Here are some of the most important sections to understand:

Purchase Price

This specifies the amount the buyer is offering to pay for the property. It can be adjusted through negotiations.

Deposit

The deposit, typically 5% of the purchase price, shows the buyer’s good faith. It is paid after subjects are removed and secures the property for the buyer.

Terms and Conditions

This section allows the buyer to list subjects that must be satisfied before the sale is firm, such as getting financing or a home inspection .

Completion Date

The date the sale is finalized and ownership legally transfers to the buyer. Closing costs are also due on this date.

Possession Date

The date the buyer takes physical possession of the property and receives the keys. Usually 1-2 days after completion date.

Adjustment Date

The date used to adjust property taxes and strata fees between the purchaser and seller so each pays the portion they owned the property.

Included/Excluded Items

Details what items the seller is including or excluding from the sale, such as appliances.

Agency Disclosure

Confirms the real estate agents representing the buyer and vendor.

Offer Expiry

Outlines when the offer expires if not accepted by the seller, usually 24-48 hours.

Working with Subject Clauses

Subjects allow the buyer to confirm details about the property before removing conditions. Common subjects include:

• Financing Subject: Ensures the buyer can secure a mortgage.
• Home Inspection Subject: Allows the buyer to inspect the property before finalizing.
• Title Search Subject: Checks for liens or other issues with the title.
• Review of Disclosure Statements: Allows review of strata documents if it is a condo.

Subject clauses provide protection for buyers so they can withdraw their offer if issues arise during the conditional period.

Using Contract Addendums

If additional terms and conditions need to be added to the contract, an addendum can be used. This avoids having to strike out or rewrite sections in the original contract.

Addendums are handy for items like adding a rent-back clause to allow sellers to stay in the property temporarily after possession date.

Following Timelines

It is essential to meet deadlines outlined in the contract of purchase and sale. For example, as a buyer you must:

• Remove subjects by the subject removal date
• Pay your deposit within 24 hours if no date is specified
• Close and pay the purchase price by the completion date

If you miss a key date, the other party can cancel the contract and sue you for damages. Heed all timelines in the contract.

Did you know that…

according to a survey by Richard Morrison, over 30% of home buyers in BC run into issues because they did not fully understand their contract of purchase and sale?

As a realtor myself, I always guide clients carefully through the contract to avoid problems down the road. Taking the time to fully understand this critical document is a must for buyers and sellers!

Understanding how contracts of purchase and sale work in BC is key for a smooth real estate transaction. This overview covers the basics, but work closely with professionals to ensure your interests are served! What about Presales: It’s also crucial to understand what is presale in the context of real estate, as it refers to purchasing a property before it’s built, often as part of a development project.

FAQs

Q: How do I download a Contract Of Purchase And Sale in BC?

A: You can find official contracts online from BC’s Land Title Office. You can also download sample forms from websites like CREA or ask your realtor for assistance.

Q: What are buyers and sellers obligated to do when signing a CPS?

A: Both buyers and sellers have obligations under a CPS. Buyers will need to pay any deposits stated within 24 to 48 hours after acceptance and they must fulfill all other terms stated in the offer such as financing before closing. Sellers must transfer ownership of the property to buyer once all conditions have been met and provide vacant possession on closing day.

Q: Is there any situation where I can walk away from my purchase contract?

A: Yes, if certain conditions stated in the offer are not met then either party can walk away from their obligations without penalty. This could result in thousands of dollars lost if deposits were made so it’s important to understand all terms outlined before entering into an agreement.

Q: Are appliances such as stove, fridge, dishwasher, washer/dryer usually included with purchase? 

A: Appliances such as stove , fridge , dishwasher , washer / dryer may or may not be included depending on whether it’s specifically stated in your purchase contract . If these items aren’t mentioned then you should inquire about them before signing anything.  

Q: What do I need to know about hand-over responsibilities?  

A: On completion date, seller’s responsibility includes delivering vacant possession meaning no tenant occupancy nor fixtures left behind that would impede buyer ’ s right for full enjoyment of property including keys for doors locks etc . Buyer’s responsibility includes paying remaining balance owing subject to any financing arrangements made prior or otherwise agreed upon between buyer and seller .  

Conclusion

A Contract of Purchase and Sale in BC is an important document that includes the details of the buyer and seller, along with other important aspects such as the contract to buy, date, deposit amount, completion date, subject to financing, buyer’s right to walk away, and vacant possession of the property. The terms of the offer are usually one or two days after it is signed by hand. There is also a section which outlines the terms and conditions which may vary depending on the amount of money involved.

Additionally, there must be a Property Disclosure Statement provided by either party along with a PID (Property Identifier) for approval before proceeding. In cases where rental property is involved there may be a counter-offer or offer or counteroffer accepted by both parties.

Sources:

https://www.peopleslawschool.ca/understand-contract-purchase-sale