Selling a House

The topics in the Dial-A-Law series provide general information on legal issues within the Province of Alberta. The purpose of this topic is to inform you of your legal rights and responsibilities. This is not legal advice. If you require legal advice, you should contact a lawyer.

This topic will discuss things you should consider when listing and selling your house.

Consulting a Lawyer

Selling a home is a significant transaction. The transactions for purchasing and selling a home are complex, and it is easy for things to go wrong.

It is essential to consult with a lawyer before signing any agreement with respect to the sale of your home. Often, a lawyer is conferred after the agreements are signed. This can be too late to fix any problems in the Agreement, as once all parties sign them, the agreements create binding legal obligations

A real estate agent or a financial institution may suggest a lawyer, but a person can choose a lawyer if they please. Check with several lawyers, asking about their prices and the services they offer.

Real Estate Agent

A seller is not legally required to use a real estate agent to sell their home. There are, however, benefits to using a real estate agent, including:

  • Advertisement for sale within the real estate industry;
  • Licensed agents have expertise in this area and have contacts with potential buyers;
  • The real estate agent may be able to ‘match your home to the needs of a potential buyer online;
  • The real estate agent may be able to suggest a few improvements to assist with ‘marketing’ the home;
  • The real estate agent deals with potential buyers.

Listing Agreement

A real estate agent will ask a seller to sign a “Listing Agreement.” A standard Listing Agreement establishes the real estate agent’s commission rate (however, this may be negotiated). The Listing Agreement states that the realtor’s commission is to be paid partly from the buyer’s deposit and partly from the purchase monies provided to your lawyer at the closing date. It is the seller`s responsibility to ensure that the commission is paid. The Listing Agreement also states the length of time the realtor has to sell your home. It is best to consult with a lawyer before signing the Listing Agreement.

Purchase and Sale Agreement

The realtor will provide a “Purchase and Sale Agreement” when an offer to purchase the Property is made. The seller should know and understand all the terms upon which they are willing to accept the offer to purchase your Property. If you do not understand any of the terms in this Agreement, ask the realtor for a written explanation or ask your lawyer. Once you and the buyer have signed the Agreement, binding legal obligations are created. These obligations can only be changed with the written Agreement of you and the buyer. It is best to review the Purchase and Sale Agreement with a lawyer before signing it.

Buyers Deposit

The buyer should put down a deposit, as an indication of good faith, for the offer to purchase the Property. The deposit may range from 5 to 10 % of the purchase price.

Conditions of the Sale

The buyer may impose conditions on the offer to purchase. A conditional offer means there is no binding contract until the conditions are met. For example, a condition may be the approval of the buyer’s mortgage or that the buyer sells their home by a specific date. If the condition is not met, and a mortgage is not obtained, or the buyer’s house is not sold within the specified time, the Agreement cannot go ahead. Other standard conditions include the buyer obtaining a satisfactory home inspection by a licensed inspector or repairs completed before the sale. These conditions must be met or waived by the buyer; otherwise, there is no binding Agreement. The requirements should be both reasonable and limited in time. Once all the conditions in the Agreement are met or waived by the buyer, the buyer is bound by the offer to purchase.

If the buyer decides, after the conditions are met, that they no longer want to purchase the home, the seller may keep the deposit or sue for damages (or both).

Representations and Warranties of the Agreement

Representations and warranties concerning the condition and location of the buildings on the Property are stated in the Purchase Agreement. If changing any conditions of the Agreement, ensure that you place your initials beside any changes.

As a seller, if you are not sure whether your Property meets the standard representations and warranties stated in the Agreement, discuss title insurance with the buyer. Title insurance will compensate the owners of the Property if it turns out that the title to the Property is not as stated, and they suffer a loss as a result.

Real Property Report

The seller must provide an up-to-date “Real Property Report” on the Property. If you do not have a current Real Property Report with Municipal Compliance, you should contact a surveyor immediately.

The Real Property Report is a survey of the land and its buildings. It will show the location of all buildings on the Property, property boundaries, the location of easements, utility rights of way, and so on. It will also show any encroachments onto the neighboring Property. The Report must be stamped by the local municipality “Municipal Compliance” to show that the Property complies with all by-laws. The municipality will not certify the survey if there is a problem with the location of any building or improvement.

If there is a problem, consult a lawyer for assistance. For example, it cannot be easily fixed, if the fence or garage goes over the onto the city property.

Actual Property Reports are discussed at greater length in Dial-a-Law Topic 474.

The fixture of the Property

Any fixtures included as part of the purchase of the home should be clearly identified in the Agreement for Purchase and Sale. Fixtures are anything that is physically ’attached’ to the house, including:

  • Major appliances;
  • Furnaces;
  • Lighting (but not necessarily light bulbs);
  • Satellite dishes;
  • Vanity mirrors and mirror closet doors;

Drapes, blinds, picture mirrors, and picnic tables are not generally considered fixtures. To be clear, any fixture that a buyer expects to remain with the purchase of the home should be written down in the Agreement.

Possession Date

The possession or closing date is the date that the Property is transferred to the buyer. This date should be clearly stated on the Agreement. The seller’s interests in the Property and any responsibility for the Property terminate on this day. The seller should arrange to have final utility readings done and cancel any automatic debit payments pertaining to the house.

Do not cancel any house insurance until after the seller receives all the purchase monies for sale. There could be a delay in closing, or the sale may actually fail. It is important to not have any gaps in fire insurance, etc.

Searches Required

All paperwork and searches performed by the lawyer must be completed by the closing date. An investigation will show whether there are any special requirements that must be fulfilled before the title is transferred to the buyer. The seller is required to pay for the searches of the title.

Title Searches are done at the Land Titles Office. Title to the Property shows all encumbrances and charges against the land. For example, a search may result in expenses such as mortgages, gas easements, restrictive covenants, rights-of-way, or builder’s liens. In real estate transactions, the seller must remove any financial encumbrances, such as mortgages, before the closing date. Some non-financial hurdles which interfere with the owner’s use of the land cannot be removed from the title, such as utility rights of way.

A search must be made at the Personal Property Registry to see if there are any outstanding debts that could ‘attach’ to the land and interfere with the sale. The seller must clear these debts from the title.

Searches must be made with the local municipality for payments of property tax, utilities, and compliance with local by-laws. In some cities, property taxes are paid by June 30 for the entire year. This means that an adjustment for tax costs is required between you and the buyer. For example, if you paid the taxes on June 30, 2017, for the entire year, and then sell your home with the possession date of October 1, 2017, then the buyer must pay you for the months they lived on the Property. Since the seller has already paid for October 2017, November 2017, and December 2017, the buyer must reimburse the seller pay for the prepayment.

Statement of Adjustments

The adjustment for the taxes is made on a Statement of Adjustments prepared by your lawyer. A Statement of Adjustments determines the final amount of money due for the sale of the Property. The Statement will show the cost of the Property, minus the deposit, and add in any “unseen” costs. The most common “unseen” costs are the property tax adjustments. Depending on the type of Property being sold, there can also be costs from adjustments made for security deposits, tenant rents, or condo fees.

The buyer’s lawyer must forward the entire purchase price to your lawyer. Your lawyer then pays any outstanding financial obligations relating to the Property. For example, your lawyer will pay the realtor’s commission, any outstanding mortgage loan on the Property, and the legal fees. The balance of the purchase monies is then released to you.

Transfer of Ownership

In Alberta, the land ownership is transferred by a Transfer of Title signed by the seller and registered at the Land Titles Office.

The Transfer of title is often registered at Land Titles before the seller receives their purchase money for the Property because some lenders will not advance any mortgage money until the buyer has the title. The seller is protected during this period as the buyer signs a Transfer-back. This will restore title and possession back to the seller if the mortgage monies are not advanced as expected. The lawyers for the seller and for the buyer are responsible for drafting the actual documents required.

Once the Transfer of title is registered at the Land Titles Office, the mortgage funds are usually advanced within 5 days. This payment is sometimes made after the closing and possession date stated in the Purchase and Sale Agreement. If the buyer moves into the Property on possession day, before the mortgage funds are advanced, the buyer must pay you interest on the amount of money still owing.

The buyer may also move in as a tenant of the Property and pay you to rent until the final payment is made to purchase the  property. The buyer would sign a Tenancy-At-Will. This Tenancy-at-Will should include the buyer must vacate the Property on 48 hours written notice if the outstanding sum is not paid within a specified amount of time.

Dial-A-Law is a Calgary Legal Guidance public service project funded in part by the Alberta Law Foundation.