BUYER'S GUIDE
Finding the perfect property can take time and careful planning. With the California Homes for Canadians Buyer's Guide, the home buying process is simplified step-by-step, so that you can take an informed approach to buying a home.
Whether you're dreaming of a vacation home, a permanent residence, or an investment property in the Greater Palm Springs Area, we make home buying easy!​
STEP #1
CONSULT THE EXPERTS
Buying a home in the U.S., as a profitable investment decision or the fulfillment of a lifelong dream, is exciting, but before making a move, it’s critical that you understand all the legal, financial, tax, and estate implications of your purchase.
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Due diligence is key. Speak with an experienced cross-border tax accountant and real estate lawyer about your goals. How you own a property in the U.S. and how you intend to use that property can have significant financial and legal benefits and consequences. Arm yourself with the knowledge needed to make the right decision for your family and your future.​​
Key Questions:​​
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Ownership Structure: Who will own the property and how it will be titled: individually, partnership, corporation, trust, or a combination of entities? Each structure has different tax and legal implications.
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Property Usage: How will you use the property: primary residence, vacation home, or rental property? Your usage will impact the amount of taxes owed and reporting requirements.​
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Tax Implications: What are the U.S. and Canadian tax implications of owning and renting out property in the U.S.? How can you avoid being double taxed by the U.S. and Canadian government? Will you require an ITIN number?
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Capital Gains: How is capital gains tax calculated on the sale of foreign-owned U.S. property?
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​​Estate Planning: How would your death affect the property's ownership, and what are the potential tax implications as a result?
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Reporting Requirements: What are the reporting requirements to the Canada Revenue Agency (CRA) and the U.S. Internal Revenue Service (IRS) regarding a foreign-owned U.S. property?
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State-Specific Regulations: What are a homeowner's legal rights and tax responsibilities in California?
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Investment Goals: Is buying a home in the U.S. the right investment for your financial goals?
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​STEP #2
NEEDS ANALYSIS
When preparing to buy a property, it's important to define your needs and wants before you start your search.
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What are your must-haves, your nice-to-haves, and your no-way-absolutely-nots?
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Would you prefer a single-family home, a condominium, or a townhouse? Gated community, golf resort, active adult (55+), or HOA-free?
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How many bedrooms and bathrooms do you need? Garage, pool, backyard?
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What neighbourhood amenities are important to you? Schools, public transportation, shopping?
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Do you want to Airbnb the property? Use it as a short-term rental, less than 30 days?
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And most importantly, what is your budget?
BUDGET
​Every need and want comes with a price tag. Determining how much you want to spend, and how much you will need to spend, is essential. Purchasing a home in the U.S. as a Canadian requires careful financial planning and decision-making.
The strength of the Canadian dollar, whether positive or negative, will be the greatest deciding factor for most Canadians considering the purchase of property in the United States. A weak Canadian dollar inflates the cost of U.S. homeownership while a strong Canadian dollar makes U.S. homeownership more affordable. However, because of the often substantial difference between the average home price in many Canadian communities vs. in the United States, many Canadians still find significant savings when the exchange rate is less than advantageous.
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More than 60% of Canadian-owned U.S. properties are purchased in cash. “All cash” purchases can save Buyers tens of thousands in traditional mortgage interest and the considerable cost of U.S. mortgage fees. Buying with cash also gives Buyers more leverage in purchase negotiations with a Seller.
If an all-cash purchase isn’t in the cards, there are many excellent financing options that are readily available on both sides of the border. In Canada, homeowners can access the equity in their current home to obtain a mortgage to buy in the U.S., or utilize a line of credit. RBC’s U.S. HomePlus Advantage, BMO’s Gateway Program, TD Bank’s Cross-Border Home Lending, and CIBC Bank USA, offer tailored cross-border mortgage solutions to meet the needs of Canadian Buyers. In the Greater Palm Springs Area, we also have many experienced U.S. Mortgage Lenders familiar with the nuances of Canadian financing for U.S.-based properties.
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Whether you choose a Canadian cross-border mortgage or a traditional U.S. mortgage, each Mortgage Lender will have their own set of requirements and mortgage products with unique benefits and drawbacks. Investigate your options carefully to determine the right strategy for you.
Once you've selected a Lender, they can help you determine a comfortable budget based on your resources and available down payment, and provide a Mortgage Pre-Approval. A Mortgage Pre-Approval is mandatory when financing a U.S. property. All-cash purchases will require a Proof of Funds letter.
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Visit our Mortgages Made Simple page for more information about Canadian and U.S. mortgage programs.​​
CLOSING COSTS
Whether you’re financing or paying in cash for your U.S. home, Canadians need to plan for a variety of closing costs unique to American homebuying, and more specifically, the Southern California real estate market. Buyer closing costs in the U.S. typically range between 1.5% and 5% of the sale price, similar to the closing costs incurred in Canada. The differences lie in the types of closing costs, the distribution of these costs between the Buyer and the Seller, and how they are required to be paid. In the U.S., Sellers typically bear a much larger share of the closing costs, compared to the more equitable split seen in most Canadian provinces. However, the distribution of closing costs in a U.S. real estate transaction can be negotiated based on the strength of a Buyer’s purchase offer, the Seller's motivation, and the overall health of the local real estate market.
Typical Buyer Closing Costs in Southern California*:
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Mortgage-Related Fees:
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Loan Origination Fee: 0.5-1% of the loan amount
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Underwriting Fee: 0.5%-1% of the loan amount
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Credit Report Fee: $25-$50
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Loan Application Fee: $200-$500
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Discount Points: One discount point equals 1% of your loan amount.
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Prepaid Interest: Varies
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Property Appraisal: $300-$600
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Lender's Title Policy: 0.5%-1% of the loan amount​
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Buyer-Related Escrow Fees: $2.00 per $1,000 of purchase price + $350
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Lawyer Fees: $1,000-$2,500 (not required but recommended)
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Home Inspection: $300-$600
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Optional Radon, Lead, Termite, and Mold Inspections: $200-$500 each
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Tax Proration: Varies​
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Fire Insurance Premium (first year): $800-$2500​​
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Notary Fees: $150-$200
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Recording Fee: $75-$225
Beyond the purchase price and closing costs, you’ll also want to factor in the ongoing cost of homeownership in this resort community. While property tax payments, utility service fees, and home repairs are universal, property expenses for a home in the Greater Palm Springs Area are unique to the type of home purchased. Homeowner Association (HOA) fees ($300-$1,000+); Mello-Roos tax; land lease fees ($1,400-$6,000+); increased home insurance and utility costs; and property management and maintenance fees for rental properties, are common overhead costs in this area.
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*The above closing costs are just estimates and will vary based on individual circumstances and market conditions.
LOCATION
When buying a home, you’re not just investing in a house, you’re investing in a community. Choosing the right area for your vacation home or investment property in the Greater Palm Springs Area takes thoughtful consideration and investigation with the help of an experienced REALTOR®. Each desert city has its own unique neighbourhoods with advantages and disadvantages that can have a significant impact on your usage and personal enjoyment of the property, expenses and taxation, and rental income.
Visit our Neighbourhood Guide to learn more about the Greater Palm Springs Area’s desert cities and their amenities.
PROPERTY TYPE
Determining the right type of home for your family goes hand-in-hand with the right location. Some cities in the Greater Palm Springs Area will have a larger concentration of affordable gated communities, condominiums, and mobile home parks, while other cities will cater to more exclusive homeownership options. There are neighbourhoods in the Valley dominated with land lease homes, some with Mello Roos tax liabilities, and many with Homeowners Association (HOA) only properties. And for Canadians considering an investment property with short-term rental potential, accommodating communities are extremely limited, and individual city licensing guidelines are constantly changing. The guidance of a knowledgeable real estate professional is essential to ensuring you invest in the right property in the right area.
What does your dream home look like?
A single-family home with three bedrooms, two bathrooms, swimming pool, and a two-car garage? Or maybe a luxurious two-bedroom condominium backing onto a world-class golf course?
What are your non-negotiables?​
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Low-Maintenance
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Investment Potential
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Accessibility
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Room for Guests
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Garage
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Backyard
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Swimming Pool
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Golf Course Adjacent
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Onsite Recreational Amenities
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Access to Healthcare Facilities
PROPERTY FEATURES
This is the wish list, the wants but maybe not the needs. A gourmet kitchen, ensuite bathrooms, walk-in closets, a fireplace, two-car garage, and a pool; all the amenities that make a house a dream home. Making a list of the features you want in the perfect property is a good idea, but prioritize them. What are the deal breakers, and do your expectations meet the realities of your budget and lifestyle. It’s not uncommon for a Buyer’s needs and wants to change during the property search. Amenities that you thought were essential may become negotiable, and features that seemed like a luxury may turn out to be necessities. Be willing to be flexible.
STEP #3
SELECTING A REALTOR
For most of us, buying a home is the most complex financial transaction we will undertake. Buying property abroad introduces a whole new set of complexities: different laws, different taxes, different expenses, and, of course, different real estate rules and procedures. To guide you safely through the process, it helps to have an expert in your corner.
We recommend partnering with a licensed real estate professional who is knowledgeable in both the Canadian and U.S. real estate to ensure that your interests are promoted and protected. At California Homes for Canadians, our Canadian-born REALTORS® are uniquely equipped to understand your questions and your concerns. Remember, we were you once – Canadians, California dreamin'.
We take our fiduciary duty of care, honesty, loyalty, and confidentiality to our clients seriously.
Our Promise:
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Education and Empowerment
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Sound Advice
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Comprehensive Due Diligence
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Expert Negotiation
We take on the headaches, so you don’t have to.
Your REALTOR® is someone you need to be able to trust and communicate openly with. You’ll be spending a lot of time with this person, so you’ll want to choose someone with whom you have a good rapport, someone who understands your specific needs, and who is knowledgeable about your preferred area and the type of property you’re looking to buy.
A great REALTOR® will also have relationships with established third-party service providers including mortgage brokers, escrow and title insurance companies, home inspectors, lawyers, accountants, contractors and, other home service professionals.
REALTOR COMMISSION
REALTOR® in the U.S. receive a commission for service, paid upon the successful completion of a sale. If the property doesn’t sell, the REALTOR® doesn’t get paid. Historically, the Seller has been responsible for the real estate commission payable on a transaction, but due to recent changes to U.S. real estate regulations, consumers are starting to see a shift in this responsibility. Who pays the REALTORS®’ commission, like the amount of the commission paid, is always negotiable.
REALTOR® commission amounts are typically a percentage of the sale price, a flat fee, or a combination of both, that is split between the Listing Broker who represents the Seller and the Selling Broker (Cooperating Brokerage in Canada) who represents the Buyer. There is no fixed real estate commission amount in California
STEP #4
PROPERTY SEARCH
Now that you’ve consulted your accountant and lawyer, determined your budget, and selected a great local REALTOR® like California Homes for Canadians, it’s time to go shopping!
A skilled real estate professional will use a variety of public and private sources including the local Multiple Listing Service® (MLS®), exclusive agent listings, For Sale By Owner (FSBOs) advertisements, and other real estate search portals, to search for properties that match your specific criteria.
Ideally when purchasing a home abroad, you’re able to attend property showings in-person. Initial viewings can be facilitated virtually, but before offering on a property, an in-person showing is recommended. We believe it’s mandatory!
During property showing tours, keep in mind your Needs Analysis. Don’t lose sight of what is important.
Finding the right property can take time and some flexibility. Be open to the process. Each city in the Greater Palm Springs Area has its own appeal and unique character that's worth exploring, and the variety of housing and ownership options is vast. There is something for every budget and lifestyle.
PROPERTY SHOWING AND REPRESENTATION AGREEMENT
With recent changes to U.S. real estate regulations, Buyers are now required to enter into a written Property Showing and Representation Agreement (PSRA) before touring a property. A PSRA formalizes the relationship between the Buyer and a REALTOR®, outlining their roles, responsibilities, and compensation. It's different from the Buyer Representation and Broker Compensation Agreement (BRBC) in that the PSRA is a shorter, less comprehensive agreement often used for initial property showings and exploration. The BRBC establishes a formal, exclusive representation relationship with a REALTOR® that details the terms of the representation, compensation, and the scope of services to be provided. In California, a signed Buyer Representation and Broker Compensation Agreement is mandatory to submit an offer on a property. ​
STEP #5
MAKING AN OFFER
You found it, the perfect vacation home or investment property. Time to make an offer. This is when the negotiating skills and experience of a real estate professional really pay off. To help determine a fair market value for the home, your REALTOR® will complete a full comparable market analysis (CMA) of similar "For Sale" and recently "Sold" listings in your chosen area. This market data acts as a starting point to establish a fair offer price. A Buyer's specific conditions of purchase including financing terms, requested contingencies, added incentives, and closing date; and market conditions like how long the property has been on the market, whether there are competing offers, the strength of the local real estate market, and the overall health of the economy, will also be important factors in determining the final offer price. Purchase offers from Canadian Buyers are typically very attractive to Sellers as they are predominately “all cash” offers, requiring fewer contingencies and Seller-paid closing costs.
In California, your offer is conveyed using the Residential Purchase Agreement and Joint Escrow Instructions (RPA). California RPAs are more detailed than Canadian Purchase Agreements, requiring a greater amount of information to provide clarity and to help protect the Buyer and Seller from unforeseen challenges and legal disputes.
Key elements outlined in a California Residential Purchase Agreement are:
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Purchase Price: The amount the Buyer is offering to purchase the property.
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Earnest Money Deposit: The funds the Buyer deposits to demonstrate their commitment to the purchase, usually 3% of the purchase price.
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Expiration of Offer: The deadline the Seller has to respond to a Buyer’s offer, typically three business days from the Buyer signing.
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Financing Terms: An overview of the Buyer financing, including loan type, loan amount, interest rate, and lender details.
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Time of Possession/Closing: The date the sale will close, and the Buyer will take possession of the property.
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Items Included and Excluded: A detailed list of the chattels and fixtures included or excluded in the purchase price. E.g., appliances, light fixtures, furnishings, security system, hot tub, landscaping.
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Contingencies: The conditions that must be satisfied for the sale to proceed. Common contingencies include home inspection, appraisal, loan approval, sale of Buyer’s property, and the review of title report, Seller’s documents, HOA documents, and required disclosures.
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Allocation of Costs: A breakdown of the fees associated with closing the sale, including Lender fees, title insurance, escrow, transfer taxes, HOA dues, and home warranty, and who pays for each: Buyer or Seller, or both equally.
​In addition to the Residential Purchase Agreement, your purchase offer must be supported by a mortgage “Pre-Approval” letter from your Lender, or if you’re submitting an “all cash” offer, a “Verification of Funds” letter from your bank, as proof that you have the funds to purchase the property.​
BEFORE YOU SIGN
Remember, the California Residential Purchase Agreement is a binding legal document. Be sure that you read and fully understand everything outlined in your offer paperwork before you sign it. When in doubt, have your Lawyer review the offer documents before signing.
Once your purchase offer is submitted, the Seller can “Accept It”, “Reject It”, or “Counter It”.
If the Seller accepts your offer, Congratulations! You’re ready to move to escrow.
If the Seller rejects your offer, you have two options: you can resubmit a new offer, or you can walk away.
If the Seller counters your offer, you now have the option to accept, reject, or counter.
With so many negotiable components included in a Residential Purchase Agreement, it’s expected that there will be some back-and-forth with the Seller. This is where the skills of a seasoned REALTOR® shine. As an advocate and expert strategist, your REALTOR® will actively pursue terms that align with your best interests, advising you through the negotiations until a favourable agreement is reached or a strategic decision is made to walk away.
PATIENCE & PERSISTANCE
Offer negotiations can spark many emotions that can lead to poor decisions. If your offer, on your terms, is not accepted, we keep looking. A great REALTOR® will remind you of your non-negotiables and support you through your home search as long as it takes. The right home for you is just around the corner.
STEP #6
OPENING ESCROW
Once an offer is accepted, an escrow account is opened.
What is Escrow?
Unlike in Canada, where a Real Estate Lawyer reviews the Purchase Agreement and the supporting legal documents, arranges for title insurance, insures there are no liens or claims, and warrants clear title to the property on closing, in Southern California, most of the duties of a Real Estate Lawyer fall to an Escrow Company. The Escrow Company, often selected by the Seller but mutually agreed upon, serves as a neutral intermediary between all parties: the Buyer, the Seller, their respective Real Estate Agents, their Lenders, and the Title Company. They collect contractually required funds and documents, manage deliverables, and upon closing, distribute funds according to the instructions outlined in the RPA.
The date that escrow is opened marks the start of the contingency period. Similar to how the “conditional period” works in Canada, during the contingency period the Buyer and the Seller are to complete any contractual obligations like home inspection, loan approval, appraisal, document review, and disclosures, within the time limit specified, to move the sales transaction forward. The review and approval of all reports and required disclosures, including the preliminary title report, is central to the Buyer’s due diligence and ability to address any potential issues with the home before the sale becomes final.
​The time between the opening of escrow, when the contract is ratified, until the closing of escrow, when the deed is recorded, is typically 30 to 60 days.​
EARNEST MONEY DEPOSITS
Earnest money is the good faith deposit paid upon acceptance of a purchase offer. It secures the property while the transaction is in escrow and demonstrates the Buyer’s commitment to the purchase. Earnest money deposits are usually 1%-3% of the purchase price and are typically issued by cheque or wire transfer to the Escrow Company within 1-3 days of a signed Agreement. In a multiple offer situation, Buyers will often include earnest money deposits with their offer submission to help strengthen their position. The higher the deposit, the greater the incentive the Seller has to select your offer over another.
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Once your earnest money has been received in escrow, it’s held until closing to be applied to your down payment and closing costs. Should the sale fall through before closing, depending on the terms of the RPA, your deposit may be refunded in part or in full.
STEP #7
CONTINGENCY FULFILLMENT
Purchase contingencies allow Buyers the time and opportunity to complete their due diligence on the property. Should a contingency not be met or satisfied within the stated timeframe, you have the right to terminate the contract or negotiate with the Seller to create new terms of agreement. The Seller also has the equal right to terminate the contract if a contingency is not met or satisfied on time.
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If all the purchase contingencies are met, satisfied, and removed, you’re now committed to purchasing the property, and the Seller is obliged to sell. If you default on the purchase after the contingencies are removed, the Seller may be entitled to your earnest money deposit as liquidated damages, and you could face legal consequences for breach of contract.
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Contingency fulfillment for a California residential purchase generally takes 17 to 21 days.
COMMON CONTINGENCIES
APPRAISAL
If you decide to finance the purchase of a home, your Lender will require an appraisal of the property as a condition of your mortgage approval. Property appraisals help protect you from paying more than the property is worth and safeguard the Lender’s investment.
A licensed Real Estate Appraiser will determine the fair market value of the property using recent comparable sales and local market data. If the appraised value is less than your purchase price, you have the option to pay the difference to the Lender in cash, renegotiate the sale price with the Seller, or terminate the contract. You also have the option to request a second appraisal of the property if you believe the initial property valuation doesn’t fairly represent the value.​
The cost of a property appraisal in California ranges between $300-$600 and is usually paid for by the Buyer. The standard appraisal contingency gives you 17 days to review and be satisfied with the property valuation.
FINANCING
Financing the purchase of a home also calls for the inclusion of a financing or mortgage contingency clause in the Residential Purchase Agreement. While a Pre-Approval Letter from your Lender will outline the loan amount you will likely qualify for, the loan type, and interest rate, it doesn’t guarantee final loan approval. The financing contingency provides you with the time needed to apply for and obtain acceptable financing, and protection in the event you are unable to secure a loan and need to walk away from the deal.
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Financing contingencies are typically 21 days.
HOME INSPECTION
A home inspection contingency is a vital part of the home buying process. In California, properties are sold in “as is” condition, meaning the Seller is not obligated to make any repairs to the property unless negotiated ahead of closing. A home inspection of the property can uncover any major repairs or safety concerns that weren’t apparent during your viewing or were undisclosed by the Seller.
​A licensed Home Inspector will examine the property’s interior and exterior, including the electrical, plumbing, heating and air conditioning systems, foundation, roof, and other structural elements, and then provide an itemized report of their findings. Buyers are encouraged to attend the home inspection to ask questions, seek clarification, and gain a better understanding of the property's condition. Beyond the standard home inspection, specialized inspections for mold, asbestos, lead, radon, termites and other pests may be required.
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If the home inspection report reveals any significant deficiencies, you can choose to proceed with the purchase, accepting the home as is, negotiate the repairs with the Seller, or cancel the contract.
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Home inspections range in price depending on the size of the property and scope of the examination. Buyers should budget $300-$600 for a standard, 2–3 hour home inspection. The home inspection contingency deadline is usually 17 days.
PRELIMINARY TITLE REPORT REVIEW
A preliminary title report provides Buyers with the opportunity to examine the property’s ownership history and identify potential issues such as liens, encumbrances, legal claims, or title defects that could jeopardize clear ownership, before committing to the purchase. If issues are discovered in the report, the Buyer and Seller will typically work together to resolve or mitigate the concerns before closing. If the issues cannot be resolved, you can negotiate with the Seller for an adjustment to the purchase price or terminate the contract without penalty. It’s important to remember that the preliminary report is not a complete history of all recorded documents relating to the property and should not be considered a final representation as to the condition of the title.
REVIEW OF SELLER'S DOCUMENTS
When buying a home in California, the Seller is legally obligated to disclose, in writing, any material facts about the property that may affect its value or desirability. The Seller’s disclosures will help you to make an informed buying decision, which can prevent legal issues after the sale. If the Seller fails to provide the required documents and disclosures, or if the information revealed in the disclosures is found to be unacceptable to you, you may have the option to renegotiate or cancel the contract.
STANDARD SELLER DOCUMENTS AND DISCLOSURES
TRANSFER DISCLOSURE STATEMENT (TDS)
The TDS outlines the property’s features, any known damage or defects, recent repairs, renovations, and any upgrades to the property’s HVAC, electrical, and plumbing systems. It also addresses environmental hazards, easements, restrictions and encroachments to the property, lawsuits, and other issues that may affect the habitability of the property. The information disclosed in the Transfer Disclosure Statement is based solely on the Seller’s knowledge of the property’s condition; it's not a guarantee or a substitute for a professional home inspection. Buyers should always do their own due diligence. Sellers are required to deliver the TDS to the Buyer within seven days of offer acceptance.
CALIFORNIA NATURAL HAZARD DISCLOSURE STATEMENT (NHDS)
Under California law, Sellers must inform potential Buyers of any known natural hazards, such as earthquakes, floods, and wildfires, in the area surrounding their property using the Natural Hazard Disclosure Statement. Sellers are required to provide the NHDS within seven days of an accepted offer. To safeguard against potential legal disputes, Sellers are also encouraged to obtain a Natural Hazard Report from a qualified hazards expert.
LEAD-BASED PAINT DISCLOSURE
Sellers of residential property built before 1978 have a legal obligation to disclose to prospective Buyers the presence of any known lead-based paint or lead-based paint hazards on the premises, and share results of past inspections or reports, if available. Sellers are also required to provide the Environmental Protection Agency’s Protect Your Family from Lead in Your Home pamphlet, informing Buyers about the risks of lead-based paint and how to protect your family.
RESIDENTIAL EARTHQUAKE RISK DISCLOSURE STATEMENT
For homes built before 1960, Sellers must present Buyers with a Residential Earthquake Risk Disclosure Statement detailing any known seismic risks, along with a copy of the Homeowner’s Guide to Earthquake Safety. Published by the California Seismic Safety Commission, this earthquake safety guide provides homeowners with valuable information on earthquake preparedness and strategies to prevent costly property damage.
HOMEOWNER ASSOCIATION (HOA) DOCUMENTS
Buyers of property in a planned community or common interest development, like a condominium apartment or townhouse, are entitled to a copy of the HOA’s governing documents including the CC&Rs (covenants, conditions and regulations), budget reports, financial statements, reserve studies, and insurance policies. These documents detail the rules and regulations that govern the community, from architectural guidelines and pet policies to noise restrictions and shared amenity usage. Commonly known as Strata or Status documents in Canada, a thorough examination of the HOA's documents is essential to understanding the community's financial health and the rules that will impact your property ownership.
MELLO-ROOS COMMUNITY FACILITIES ACT TAX DISCLOSURE
Mello-Roos refers to a special assessment tax district established to finance local infrastructure. If a property is subject to Mello-Roos tax or any other special tax, Sellers are required to disclose this information to potential Buyers and make a good faith effort to obtain a “Notice of Special Tax” for the Buyer from the local levying agency. These special taxes will appear on your annual property tax bill alongside your regular property tax.
NOTICE OF SUPPLEMENTAL PROPERTY TAX BILL DISCLOSURE
Real property in California is assessed for tax purposes on the date a property changes ownership. Sellers are required to inform Buyers via the Notice of Supplemental Property Tax Bill Disclosure of any estimated property tax increase not reflected in the initial tax bill. New Owners can expect to receive one or two supplemental tax bills, depending on the date of closing. As the new Owner, it’s your responsibility to pay these supplemental taxes directly to the Tax Collector, not your Lender. Supplemental taxes are based on the difference in value between the property’s assessed value before the sale (current roll value) and the new value at purchase, prorated from the closing date until the end of the fiscal year, June 30th. Supplemental bills are often mailed several months after closing.
CALIFORNIA APPRAISAL DISCRIMATION ADDENDUM DISCLOSURE
In an effort to promote affordable housing and fair housing principles, the California Appraisal Discrimination Addendum Disclosure was created to inform Buyers of their rights should they believe they were discriminated against during the appraisal process. Property appraisals must be conducted objectively without consideration of race, religion, gender, national origin, or disability. If you suspect discrimination during the appraisal process, complaints can be filed with the Bureau of Real Estate Appraisers (BREA) and the California Civil Rights Department (CRD).
SALE OF BUYER'S PROPERTY
Including a home sale contingency would not be a viable option for the majority of Canadian Buyers looking to buy property in the United States. A contingency to sell property before finalizing the purchase of a contracted home creates added uncertainty and potential delays to the closing. This uncertainty is further compounded when the contingent sale is occurring in another country. Canadians should be confident of their financing before drafting a Residential Purchase Agreement.
STEP #8
REMOVAL OF CONTINGENCIES
The contingency removal process is a critical phase in a real estate transaction, signaling a Buyer's commitment to the purchase. After an offer is accepted, you have a defined period of time, generally 17 to 21 days, to conduct various investigations, such as a home inspection, appraisal, preliminary title report, mortgage financing, and review of Seller documents and disclosures. Escrow will help manage the exchange of documents between you and the Seller, and ensure that all contractual conditions, including the formal removal of contingencies, are satisfied before the sale is finalized. During the contingency period, the property is "under contract" but the sale is still subject to these conditions.
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Once you’ve completed your due diligence and are satisfied with the findings, your REALTOR® will have you sign a Buyer Contingency Removal Form (similar to the Notice of Fulfillment or Waiver used in Canadian real estate transactions). By signing the Contingency Removal Form, you’re agreeing to waive your right to cancel the contract based on those specific conditions.
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If you’re not satisfied with the results of your investigations and choose not to remove your contingencies by their deadlines, you can work with the Seller to resolve any issues or cancel the contract. Should you choose to terminate the Purchase Agreement after you’ve removed your contingencies, you risk forfeiting your earnest money deposit.
STEP #9
CLOSING THE SALE
We’re in the home stretch! With all the contingencies removed, the process of officially closing the transaction begins. Closing the sale requires a true team effort that culminates with the recording of the deed at the County Clerk’s office. In the days leading up to the end of escrow, make sure you maintain frequent contact with your REALTOR®, Lender, Escrow Officer, Title Company, and, if required, your Lawyer, to provide prompt resolution of any last-minute details.​
Knowing what to expect during the final stage of a real estate transaction will help ensure a smooth and successful home purchase.
TITLE INSURANCE
In preparation for the close of escrow, the Title Company will complete a thorough search of public records to verify the property's ownership history and confirm the title is free of any legal claims or defects.
Purchasing title insurance protects you from financial loss if any unforeseen title issues arise after closing. Standard Owner title insurance in California is known as a CLTA (California Land Title Association) policy; it provides basic coverage against title defects found in public records. For more comprehensive title protection, an ALTA (American Land Title Association) policy also insures against risks not found in public records. If you’re financing your purchase, your Lender will often require the extended protection of an ALTA policy to shield them from any financial loss should a title issue occur.
Title insurance premiums are a one-time fee paid at closing that provides protection for the entire period of your ownership. In the Greater Palm Springs Area, the Seller is usually responsible for the cost of the Owner’s title policy, and the Buyer pays the cost of the Lender’s title policy; however, these responsibilities are negotiable.
HOME INSURANCE
Although not legally required in California, Homeowners Insurance is necessary to protect your home from financial loss due to unforeseen events such as fires, theft, and natural disasters. For Canadians, home insurance coverage is essential, especially if the property will be periodically vacant or rented out. It is also a prerequisite of most mortgage financing, to safeguard the Lender’s investment.
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Beyond protecting just the structure, Homeowners should consider content insurance and liability coverage to insure their belongings and to provide protection against potential lawsuits. In California, separate policies for earthquake and flood are also recommended. Consult your REALTOR® and a local insurance provider to determine the right coverage for your specific needs.
FINAL WALK-THROUGH
This is your last opportunity to inspect the property and verify that all the agreed-upon repairs have been completed and that the home is in satisfactory condition before signing the closing documents and taking possession.
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During the final walk-through, carefully examine the interior and the exterior of the home. Test the appliances, HVAC system, plumbing, and electrical. Inspect the walls, ceilings, floors, cabinetry, windows, doors, the roof, siding, any fencing or decks, and all the fixtures. Bring a copy of the Residential Purchase Agreement, Home Inspection and other reports, and any Request for Repair forms, along with a camera to document any issues.
If any new deficiencies or incomplete repairs are discovered, your concerns should be promptly communicated to the Seller’s Agent for resolution. This may include negotiating for repairs, a credit to the purchase price, or a combination of both. If the Seller is unable or unwilling to complete the repairs or renegotiate the sale to your satisfaction before closing or by a mutually agreed-upon date, you may have the option to cancel the purchase and recover your earnest money deposit, and pursue additional monetary damages.
​If you are unable to attend the final walk-through, your REALTOR® can complete the inspection on your behalf. However, we advise against this. We recommend re-engaging the services of the Home Inspector who completed the original home inspection, to reinspect your property.
SIGNING CLOSING DOCUMENTS
It’s time to make things official. With all the Residential Purchase Agreement conditions met, the Escrow Company will prepare the necessary closing documents for your signature, including the deed, title documents, closing statement, and, if financing the purchase, the mortgage paperwork. Before signing, consult with your REALTOR® or a legal professional if you have any outstanding questions or concerns. It's important to fully understand each document.
Just like your property search, home inspection, and final walk-through, we strongly recommend that you be in the Greater Palm Springs Area for the signing of your closing documents. The State of California does not accept the notarization of documents by a Canadian Notary which can complicate matters if you’re not present for the closing.
To authenticate your closing documents from Canada, you will either need to make an appointment at the closest U.S. embassy or consulate to sign in front of a U.S. government official, or use a Remote Online Notary (RON). RON services allow your documents to be notarized via secure video conferencing, eliminating the need for you to be physically present before a Notary. While the implementation of RON services in California is currently stalled, the State does recognize commissioned Notaries from other U.S. States.
Remember to thoroughly investigate a Remote Online Notary for compliance before engaging their services.
FIRPTA is a U.S. tax law that imposes income tax on foreign persons who dispose of U.S. real property interests. When a foreign person sells U.S. real estate, FIRPTA requires the Buyer of the property to withhold a percentage of the gross sales price and submit it to the IRS. This withholding serves as a prepayment of the foreign Seller's potential U.S. income tax liability. While the responsibility for withholding falls on the Buyer, the Seller can apply for a withholding certificate from the IRS to reduce or eliminate the withholding if they can demonstrate that the actual tax liability will be less than the withheld amount, or if an exemption applies. It's imperative that both the Buyer and the Seller in a real estate transaction involving a foreign person understand FIRPTA's implications, as failure to comply can result in significant penalties.
The standard FIRPTA withholding rate is 15% of the gross sales price. A reduced rate of 10% withholding will apply if the purchase price is between $300,001 and $1,000,000 and the Buyer is an individual who intends to use the property as their primary residence. There is no withholding if the purchase price is $300,000 or less and the Buyer (an individual) or a member of the Buyer's family intends to reside at the property. The Buyer is responsible for submitting Form 8288 and Form 8288-A with the appropriate withholding amount to the IRS within 20 days of the date of transfer.
STATE OF CALIFORNIA FOREIGN SELLER TAX
In addition to the Foreign Investment in Real Property Tax Act (FIRPTA), Canadian Sellers of California real estate are also required to pay 3.33% of the gross sales price to the Franchise Tax Board (FTB). Similar to FIRPTA, this amount is withheld and remitted by the Buyer as a prepayment of the tax owed.
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (FIRPTA)
TRANSFER OF FUNDS & LOAN FUNDING
At least three days prior to closing, your Escrow Officer will provide you with an Estimated Closing Statement outlining the remaining down payment and closing costs that you will need to wire to your escrow account.
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Once your final mortgage documents have been signed, they’re forwarded to your Lender for review. The Lender will examine the documents for accuracy and verify all signatures. If all the paperwork is in order, the Lender will then wire the loan funds to the Escrow Company.
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Any final adjustments required to the closing costs will be made at the close of escrow. With all funds now confirmed in escrow, the property deed can be recorded, and the funds can be disbursed.
TITLE TRANSFER & DEED RECORDING
In California, ownership of a property officially changes hands when the deed is recorded at the County Clerk’s office. Recording the deed provides public notice of your legal ownership, establishes clear title to the property, and protects you from fraudulent claims and unforeseen liens. As soon as confirmation of the recording has been received, the Escrow Officer will distribute funds from the escrow account to settle any outstanding debts associated with the property. The remaining balance is the net proceeds paid to the Seller.
Congratulations you’ve bought a home!
Upon completion, you’ll receive a final closing statement and the keys to your new home. It's time to celebrate!
