Primer: Buying Real Estate in Victoria, BC
INTRODUCTION
The prospect of owning your own home can be very exciting, especially for first time buyers. There is a lot of data to consider before entering the market. Before you contact a realtor or start searching the Multiple Listing Services® for Victoria, BC, it pays to understand what types of real estate are suitable for your unique situation. This page helps educate potential buyers on the many implications of home ownership.
CAN I EVEN AFFORD A HOME?
According to Canada Mortgage and Housing Corporation (CMHC) guidelines, your monthly housing costs should not be more than about 35% of your gross monthly income. This includes costs such as mortgage payments, insurance, taxes, utilities and repair costs. Additionally, your entire monthly debt load should not be more than 42% of your gross monthly income in order to be deemed capable of servicing (paying) your debt load. The latter figure includes your mortgage payments and all your other debts.
For new prospective home buyers, it is advisable to get your finances in order and understand the limitations of any real estate purchases in terms of budget. You can easily find a Realtor® to help you prepare for this. You may want to read our webpage on how to find a good realtor.
WHAT DO I DO FIRST?
If you are going to finance a real estate purchase, the first step is to get your finances in order. Before buying a home in Victoria, BC, it is important to debt load you can service and the amount of down payment you are able to afford.
The Canadian Mortgage and Housing Corporation (CMHC) also prescribes that a families entire monthly debt load should not be more than 42% of your gross monthly income, as noted above. Even though there are lenders who may be willing to do higher debt-to-income ratio lending, most experts would advise anyone to think very carefully about their overall debt load. Note that the income requirements are shared amongst all family members who will be purchasing real estate, not just applicable to the head income earner.
After a careful review of your financial position, you need to consider addition closing costs. When a home is purchased, there are several extra costs associated. Some of these are listed below.
After the basic finances are in order, the next steps will be to decide the type of home and neighbourhood you wish to purchase in. We have a very thorough page published about Victoria, BC Real Estate Statistics that should also be read to help you understand the major market trends.
Last but not least, finding a good realtor will be important. It may be best to select a realtor who has localized knowledge of the specific municipality within Victoria, BC Capital Regional District (CRD) as well as one who specializes in the type of dwelling you seek to purchase (examples - single family detached dwelling, condominium, vacant land, rural acreages etc).
HOW CAN I FINANCE A REAL ESTATE PURCHASE?
There are many avenues to finance real estate purchases in Canada and almost all are available in the greater Victoria area. Typically, a mortgage is used to finance a real estate purchase. These come from financial institutions, albeit a wide range of types of institution. Chartered banks, credit unions and trust companies will all be competing to offer you a mortgage and finding the best deal will depend on many factors. These may include your credit rating, your net income and of course the general interest rates. Finding a good mortgage broker to discuss the particulars with is a good first step. In many cases, any real estate agent will likely have a few different contacts to share with you as it is in their best interests to see you finance a real estate transaction.
HOW DO I PICK A REALTOR
Choosing a realtor that works for you is a highly personal process. We have built an entire page on how to select a good realtor and outline many of the factors affecting your decision. Briefly, these can range from how well you mesh with them on a personal basis to specialized knowledge of a particular locale or type of property. Some realtors focus almost exclusively on one type of property such as luxury or high end real estate while others may focus on a specific geographical location like Oak Bay and only for condos.
We suggest you peruse the page how to select a good realtor for more on this topic.
SELECTING A PRICE RANGE
Selecting a price range is not a decision to be taken lightly. When purchasing real estate, you need to strongly consider many factors. Are you the sole person responsible for servicing the costs of the property? Will you sub-let part of your real estate purchase to others who may then help you financially? Is your occupation stable and what are your future prospects for earning more money?
The Canada Mortgage and Housing Corporation (CMHC) guidelines will help you figure out the general price range in terms of costs of mortgage payments and your down payment requirements for the price range you are considering. While not written in stone, the guidelines are generally accepted as normal within the industry. Luckily the Victoria, BC real estate market offers choices ranging from a few hundred thousand dollars to tens of millions of dollars, meaning most people will be able to find a price range they can afford.
RESEARCHING NEIGHBOURHOODS
A neighbourhood is everything in real estate. The term "location, location and location" is often used to describe the three most important elements of home value. Victoria, BC has many neighbourhoods both within the Victoria proper area and amongst the municipal districts that comprise the Capital Regional District.
REVIEWING PROPERTIES ONLINE
While at all not common prior to 2000, almost 100% of all real estate purchase decisions start with online research. Most real estate companies within the Victoria, BC area pool their listings into a common listing database called the Multiple Listing Service® or MLS® (see registered trademark notices at the bottom of the page) services. We have included a form on this website as a direct gateway to search the MLS®. From that page, you may search for Victoria, BC real estate as well as surrounding areas on Vancouver Island.
WHAT COSTS ARE INVOLVED IN BUYING A HOUSE IN VICTORIA?
There are many costs that will arise for both buyers and sellers of real estate in the Victoria, BC market. Without limitation, here are some of the categories. The fees specified are estimates only and individual prices may vary for items.
- Lawyer or Notary Costs: $700 – $1,200. A lawyer is generally not necessary for most real estate transactions unless there are complications such as multiple liens involved or you are assembling a series of lots to form a land package. For most residential home buyers, a notary public can easily provide the services required and costs are generally within the range above.
- Appraisal Costs: < $800. Depending on the type of transaction, an independent appraisal may be requested by any financial institution as part of the mortgage procurement process. Any real estate deal could be subject to these costs yet they are most likely to be incurred when the sales price is statistically higher than comparable real estate transactions on a single family detached home. If your financial institution requests an appraisal, it should be considered as money well spent before you purchase a house that is potentially over-priced.
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Survey: $500 – $1,600. Any owner may request their property be surveyed at any time. it is most common as a practice to hire a surveyor when you're buying a home or constructing a new home on vacant land. A mortgage provider may require a property survey to make sure the property is in excess of the mortgage total they are providing to you to buy the house. Homeowner insurance providers may also request a survey if there is coubt to the value of the property.
Real estate surveys are not a strict legal requirement. Many financial institutions will be ok with mortgage title insurance. Proper surveys will likely require research into a property as well as a physical review. Survey items may include a history of easements, the deed, covenants against building as well as a a title search. The primary focus is to ensure there are no discrepancies about whom owns the land.
A formal property survey will include a legal description of the land that specifies exact measurements, and the regional districts official legal records. It normally includes the boundaries of the property and descriptions of buildings both upon the land and adjacent properties. It may optionally include notes of any upgrades or improvements a homeowner may be legally entitled to perform in accordance with appplicable real estate laws and both federal and local regulations.
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Inspection Costs: $500 - $1,000. As with a survey, an inspection is usually in the buyers interest as it can reveal any discrepancies between the advertised details about real estate compared to the actual facts. An offer to purchase real estate may be made with "conditions" such as a home inspection, which allow the buyer to pull out of a real estate transaction if the inspection does not reveal favourable facts. In a "buyers market", if a seller receives multiple offers for a property within the same price range, they may be more reluctant to accept offers with conditions. At the very least, such conditions will generally be time limited in order to not limit the sellers options. A good real estate agent can help you navigate the best way forward.
Inspections in Victoria, BC will also likely include scans for underground, decommissioned heating-fuel storage tanks, septic systems (if applicable), water supply levels (if not on municipal water systems) and even drainage patterns. - Property Transfer Taxes: The current status quo for British Columbia's property trasnfer tax is 1% on the first $200,000 of the purchase price; 2% on the next portion of the purchase price between $200,000 and $2,000,000; a further 3% on that portion of the purchase price between $2,000,000 and $3,000,000 and 5% on that portion of the purchase price over $3,000,000. The property transfer tax clearly helps entry level home purchasers while seeking extra tax revenues from more luxurious estates.
- Foreign Buyer Property Taxes: the British Columbia government brought in new laws to charge an additional tax of 20% of the property’s value solely only applicable foreign nationals, corporations or trustees. There is also an empty house tax to consider which does not apply to most BC residents residing in their own homes.
- Goods and Services Tax (GST): 5%. Let's not forget the federal government. This tax applies to new homes and in some limited cases. If you are buying an existing property, this tax is not a consideration.
- Homeowner Insurance: $Varies. For any buyers who have high ratio mortgages, defined as leveraged over 75%, homeowner insurance will be considered as a mandatory component to any financing deal. Most homeowner policies protect homeowners against common threats including fire, flooding, theft and more. There are some special limits and considerations in certain areas for restrictions on Tsunami and earthquake damage and other localized risks. Contact a good insurance agency to discuss your planned purchase and they will likely be able to provide a quote in advance of your purchase.
- Property (more) taxes: $Varies. Each municipality with the Capital Regional District will assess your property taxes for basic municipal services like refuse collection, recycling, street and infrastructure costs, fire and police and other municipal items. The costs vary depending on the assessed value of your home as well as the municipality. Areas without municipal water and garbage collection may be less than urban areas with integrated infrastructure.
- Strata Fees: $Varies. If you purchase a condominium or other shared infrastructure dwelling, you must expect to pay your fair share of the fees to upkeep the common interests. These fees are usually described as part of any real estate listing. Be sure to review the historical increases in strata fees as well as note any potential issues with a shared building. A new roof or a condominium may require each strata title holder to chip in their fair share.
- Moving Costs: $Varies. Moving costs can range from buying fuel and cocktails to your friends who agree to help you to hiring professional moving companies. The costs are quite flexible and this is often a personal decision. Some moving companies also offer moving insurance to bridge the gap between your own and new residence.
- Hookup Costs: $Varies. When you move, even if you do not purchase real estate, you need to be aware that some utilities charge relocation or hookup fees for changing your address of service. In most cases, these will be the least of your costs however you should prepare the logistics of the dates to switch services in advance of moving to ensure a more favourable experience.
FURTHER QUESTIONS?
If you have any questions, please use the contact link in the menu to reach us. We will add the information to this page or our blog page.