Cell: 604-855-2521 |

~ Purchasing Real Estate from Non-Resident Sellers ~

~ Purchasing Real Estate from Non-Resident Sellers ~


Here is a Real Estate story that will send chills up your neck.

One day John and Mary drove through the neighborhood where they always wanted to live but they could not afford to buy their first home...or so they thought. A For Sale By Owner sign in front of the desirable home announced
that the price was more than reasonable, and after making a call and viewing the house they decided to write an offer on the property. The person that they were dealing with told them that it may take couple of days to get an answer since the owner was a non-resident.  Withing a day the offer was accepted and John and Mary made
necessary arrangements to obtain a mortgage from their bank and inspect the property by a licensed inspector.
Once satisfied they removed all the subjects and a few weeks later they moved to their new home. So far so good!

The trouble began when the letter from CRA arrived asking them to pay the back taxes on the sale of the property.
They thought it was a mistake. Why should we pay taxes on the profit that the seller made when he/she sold them the house?

After meeting with a lawyer and accountant they were explained that since the seller did not pay the taxes and the buyers did not withhold 25% of the purchase price as they were required, John and Mary became liable for the taxes that seller did not pay.

I know what you are thinking right now,"This is  stupid."  I agree, it is not fair. But here is a chapter from the CRA rule book as presented by Manning Elliot LLP chartered accountants.

Anytime a purchaser is acquiring property from a non-resident, great care should be takes. The purchaser becomes liable for the tax liability in the event that the non-resident doesn't comply with the income tax rules in force at the time of the sale. Care should be taken to ensure that any vendor of real estate is a resident of Canada. The purchaser must be able to prove that they've made reasonable inquiry into the Vendor's country of residence to remove their own liability. A purchaser should consider having the vendor warrant verification of residence in
the sale/purchase agreement for the property to address this concern.
Wen purchasing property from a non-resident, ensure you have a copy of the certificate of compliance from CRA prior to completion. If not, you as a purchaser are required to withhold 25% of the purchase price from the sale and remit it to CRA on behalf of the vendor. Also, be sure the amount of the compliance certificate is the same as the agreed purchase price. Otherwise, CRA will hole the purchaser liable for the 25% of the amount by which the actual sale price exceeds the certificate of compliance.

So here is the lesson. Before you make one of your largest purchases in your lifetme, do your diligents and if you have no time to do it yourself then hire a competent Realtor to protect you from similar problems.  I wish I could say that the story was fictional but I can't. Although the names are made up the story isn't.

 

Tibor Bogdan

Comments:
No comments

Post Your Comment:

The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.