Closing Costs

The Buyer

Residential Property: New Home

• Legal Fees: Lawyers' fees vary. When hiring a lawyer to close the deal, make sure this issue is among the first topics discussed.
• Land Transfer Tax: This is a sales tax charged by the provincial government. The formula used to assess the tax for residential properties is as follows:
  • 0.5% of the first $55,000.00 of the purchase price
  • 1.0% of the next $195,000.00 of the purchase price
  • 1.5% of the next $150,000.00 of the purchase price
  • 2.0% of the balance of the purchase price
• Sales Tax on Chattels: Buyers are required to pay the provincial sales tax of 8% on the value of any chattels (fridge, stove, etc.) included in the purchase price.
• Property Inspection Report: Before buying a property, it's a good idea to have it inspected by a qualified, professional property inspector. The inspector will provide you with a written report. Property inspections cost $250.00 or more, depending upon the inspector and the size of the property.
• Mortgage Financing Fees: Many mortgage companies charge appraisal and processing fees, which can amount to several hundred dollars. If borrowing more than 75% of the property's value ("high ratio financing"), there will be mortgage insurance premiums added to the face amount of the mortgage.
• Discharge Penalties: If the buyer is discharging a mortgage on the property being sold, the mortgage company may apply discharge penalties amounting to three months' interest on the mortgage to be discharged. However, the mortgage company may be prepared to waive all or part of the early discharge penalty if the buyer agrees to mortgage the new property with the same mortgage company.
• Survey: You may want a new survey, or your mortgage company may require one in order to approve the mortgage funds. The cost of surveys starts at about $900.00. The price goes up depending upon the size and configuration of the property.
• Title Insurance: Most mortgage lenders are prepared to accept title insurance instead of a survey. A Title Insurance policy costs about $250.00 - $300.00 for most residential properties. The fee varies to some extent with the value of the property.
• Disbursements: When your lawyer closes the purchase, he/she will have to pay a variety of expenses for you. These costs will be added to the legal fees. Such disbursement costs include: fees for registering the deed and mortgage, building and tax certificates, hydro and water status reports, etc. On a standard residential purchase, these costs will run between $300.00 and $500.00.
• Adjustments:
  • Property Taxes: The annual real estate taxes will be apportioned to the seller and the purchaser as of the date of closing. If the seller has prepaid the taxes for the year, the purchaser will be required to reimburse a 'pro rata' portion to the seller.
  • Fuel Costs: If the property is heated by oil, the purchaser will be required to reimburse the seller for the value of the oil remaining in the storage tank on closing.
  The purchaser's lawyer arranges for these adjustments with the seller's lawyer as part of the closing process.

• Moving Costs: Moving costs vary with the distance moved and the weight and volume of possessions moved. Shop around—get an estimate from more than one mover. Plan ahead, too, and book your mover well in advance of your closing date.

• Insurance Policies (it's a good idea to have these in place when buying property):
  • Closing Insurance Policy (about $40.00)
  • Home Warranty Policy ($230.00-$350.00)
  • Property Insurance
  • Occupier's Liability Insurance

  Contact an insurer well in advance of closing in order to ascertain the costs, and to have the policies in place at closing.

Condominium Purchase

There are some special costs involved with a condominium purchase.

For example, you will want a Status Certificate. The Status Certificate includes all-important documents concerning the financial affairs of the condominium corporation, plus the by-laws and the rules that owners are required to abide by.

The Status Certificate costs $100.00, plus photocopying.

Take note: a condominium owner pays a monthly maintenance fee to the condominium corporation. This fee will be apportioned between the seller and the buyer and becomes effective with the date of closing.

Rental Property Purchase

If you are buying a tenanted property, any prepaid rents will be accounted for as part of the closing process. If the seller has collected the last month's rent, which is standard, you will be credited with that sum on closing.

Rural/Recreational Properties

There are a number of issues that must be canvassed by buyers of rural/recreational properties.
They include:

• water quality and quantity
• the condition of the septic system
• road access
• availability and cost of municipal services (e.g. garbage collection, schools, busing, road maintenance)

All such issues need to be investigated fully at the time of purchase. Some of these investigations will cost money. You may, for example, be required to pay a fee for the water quality and quantity tests. If you wish to have a professional assessment of the condition of the septic system, there will be a fee.

Consider all of these issues at the time you are considering the purchase.

New Home Purchases

• GST: The biggest extra cost that attaches to new home purchases is GST. GST is a 7% sales tax imposed by the federal government on new homes, as well as most other goods and services.
  • GST is not applied to purchases of resale ("used") homes.
  • Many builders include the GST in the purchase price.
  • Make sure that the issue of who pays the GST is resolved in the Agreement of Purchase & Sale. Read your contract carefully.
• Additional Costs: These apply to a wide variety of items, including paving of the driveway, landscaping, etc. On some new home purchases, the bill for these "extras" can be thousands of dollars.

Commission

In some cases, it is in the buyer's best interests to pay the real estate broker's commission directly, instead of having the seller pay it.

By taking the commission out of the purchase price, thereby lowering the purchase price, both the land transfer tax and the commission (if it is a percentage of the purchase price) are lower, saving the buyer money.

The Seller

In comparison, the seller has relatively few costs associated with the sale of a home. These costs are outlined briefly below:

• Real Estate Fees: including G.S.T.
• Survey: if one were required according to an Offer (definitely, NOT always the case)
• Legal Fees
• Moving Fees: if applicable
• Fees for Paying Out a Mortgage (perhaps): if that were the case