If you’re a looking to buy a property in another country or city the process can seem daunting. Whether you’re a Canadian looking to buy in another province, an American looking to buy in Canada, or a Canadian looking to buy in the U.S., the process of completing any of these real estate transactions can vary. Whether it’s finding a different legal representative to guide you to becoming aware of additional taxes while buying across the border to finding a referral-agent to help make the process as smooth as possible, there’s a lot to consider.
To help make the process of buying a property in another country (or state, or province or city) as smooth as possible here’s a go-to guide on the critical steps you need to know before purchasing that property.
How to buy a home in another Canadian province
Step 1: Do your due diligence
Before you choose a region or city that you want to buy property in, consider all of your options. If you are looking for a vacation home in say Banff or Whistler, check out the local amenities and price ranges first. If you are looking for an investment property in say Montreal or Calgary, be sure you can find a property that will province a high enough rental price to ensure your mortgage will be covered. Lastly, do general research into the differences in property taxes, land transfer fees and the overall market. Although you can find this information on your own, it also helps to have a local real estate agent to help guide you along the way, which leads us to the next step.
Step 2: Find a referral-agent
Buying a new home is never easy, but what makes the process even more complicated is when you are purchasing property in a new city while also using a new real estate agent. You’re probably wondering whether buying your new home is going to be different than it was when you bought property in your hometown with a trusted Realtor. To ensure you are using a real estate agent that you can trust or that you know has experience and knowledge of the new area, find a referral-agent by asking your current Realtor for a contact. The more information you have and the better protected you are as both a client and consumer, the better chance you’ll have of finding a property you love. Because agent-referrals include an economic incentive for both parties, you can feel confident that your Realtor is sending you to someone they trust and that knows what they’re doing.
Step 3: Hire the right lawyer
Although you may already have a lawyer in your hometown or where you currently live, you will need to find a lawyer that works in the province where you are buying property. The reason for this new relationship is because each province has different licensing for lawyers. For example, if you live in B.C. but are buying in Ontario, you will need to have an Ontario-based lawyer complete all legal work. Once you have found this legal representative and property you love, the lawyer can prepare all documents and send them to you. You can then sign the papers in front of a notary or lawyer, and send them back. Let your lender know that you are buying in another province and therefore need the mortgage documents to be finished sooner than usual to allow time to make the closing date.
Aside from these three steps, the process of buying a home in another province is not much different from that of buying within your city. However, remember to keep in mind the additional cost of having two lawyers and the difference in price of properties in a hot market.
How to buy a home in the U.S. as a Canadian
For those looking to purchase property in the United States, the process is similar to that of home buying in Canada. Rick Metcalfe, a Canadian real estate agent who lives and works in Phoenix, AZ compares the transaction to that of buying property in another province. Having worked with many Canadians who purchase in the U.S., Metcalfe typically helps clients with more than just finding homes for them, but also with lender recommendations and tips.
Step 1: Research, research, and research some more
Buying in Canada seems natural when you consider the fact that there are only 162 cities to choose from, whereas in the U.S., you’ll have the overwhelming option of over 35,000. Before you decide on the final destination for your vacation home or investment property, consider the financial aspects first, such as the cost of homes, the difference in currency and how much it might cost to fly or drive to the property. But also remember to consider things such as the climate and amenities. The regulations Canadians should know about include: the length of time it takes to secure a mortgage and get to closing — which typically takes 45 days — and the higher costs of taxes, title insurance and mortgage insurance.
Step 2: Hire local professionals
When it comes to buying your destination property, having a Realtor that knows the rules and regulations is a must. If you hire a professional that understands the laws and does things correctly upfront, “this should be a smooth and efficient transaction,” said Metcalfe. Referral-agents can be a huge benefit as you are often being sent to the best of the best by a Realtor you trust and have worked with in the past. Just like in Canada, real estate agents that are referred must complete a form that includes all necessary details, and the same range of commision fees — 20% to 35%. Aside from hiring your referral-agent, you’ll also need to look at local lenders, lawyers and mortgage brokers.
Step 3: Understand your tax responsibilities
When it comes to the amount of taxes you’ll have to pay on your property abroad, the U.S. takes what type of property this is to the homeowner into consideration. For example, if the property is mainly used as a vacation home, you’ll have to pay the general mortgage interest and property taxes. However, if you decide to rent the house out, you’ll have to claim that as income earned. If you are buying the property to use as a rental unit, think of this property as a business and keep thorough records of your finances, both income and expenses.
A few years ago, Colleen Reid and her husband, who currently live in Edmonton, Alberta, chose to buy a vacation property in Phoenix, Arizona. They did so by communicating with other friends who had done the same, rather than working with a referral-agent. However, now that they’ve owned the vacation home for a few years, Reid said that given a chance to do it all over again, she would find a Realtor who specialized in that area. “I think an agent could’ve saved us a lot of time and money.” Be sure you follow these steps to make the process of buying property in the U.S. as painless and straightforward as possible.
How to buy a home in Canada as an American
As for foreign buyers choosing to purchase property in Canada, the same vital steps are essential to ensuring the home buying process is seamless. The most important things to understand are your financing options, the cost of taxes and your insurance selection. However, those aspects can be a breeze if you find the correct agent to work with.
Step 1: Hire experienced professionals
Before making any decisions, the first thing you should do is find a Canadian Realtor in the city you’d like to buy. This way, the agent can help you find some great listings and navigate the process of purchasing property in a new country right off the bat. Dylan Nihte, a Vancouver-based real estate agent, says the first thing Realtors do is get to know their client and what type of home or property they are looking for. From there, they can help them to understand the current market and manage the buyer’s expectations. It’s crucial to “explain the market, explain the process, and explain the banking requirements,” said Nihte. After the Realtor understands your needs and you understand the expectations for buying in Canada, they can connect you with other professionals you need such as legal representatives, home inspectors and lenders. From there, you can make the final call on who you’d like to work with.
Step 2: Understand the financial differences
Typically, non-residents are required to have a more substantial down payment of around 35% and may also have to pay higher interest rates to obtain their mortgage. As far as taxes go, check out the province you plan to buy in for potential laws surrounding additional costs. In Ontario, non-citizens purchasing property are subject to a Non-Resident Speculation Tax which sits at 15% of the purchase price and in Vancouver, there is Foreign Buyers Tax legislation that is key to know. Lastly, proof of home insurance is required for foreign buyers to obtain a mortgage in Canada. Hiring a referral-agent can help you to ensure you cover your bases and to provide support in finding the necessary financing and insurance option that best suits your needs.
Step 3: Visit the property before you close
Most real estate agents recommend that international buyers come and visit their potential new city and property before they seal the deal. “It’s a good idea to get to know the roads, get to know the city and become comfortable with the transaction process,” said Nihte. Although some cities in the U.S. have similar temperatures and atmospheres, things in your new Canadian vacation home and city might be different than the photos you checked out online. Visiting what may be a significant financial investment is always a good idea to ensure that you are happy with the final pick.
In all three of these home buying situations, you can refer to each process and find a valuable piece of information to make your experience less stressful and more straightforward. When it comes to a vacation home or investment property, you probably have a clear vision of what you want and where you want to buy, which is why it’s good to have trusted professionals help guide that vision and manage your expectations before the transaction is closed. You can never do enough research before making a big financial decision.