July 24, 2018
Moving creates a flurry of physical and financial activity.
When I moved across the country a few years ago, I used a Google sheet to track exactly who I needed to pay and by when. So, when moving day happened, and I was signing closing documents with my right hand, balancing moving boxes on my left hip, and consulting with my lawyer on speakerphone, I didn't miss any important financial details about my real estate transaction.
To avoid any surprises, here's a list of often overlooked costs for buyers and sellers.
Legal: To finalize a home purchase, both the buyer and seller must hire a lawyer or notary public to process the deal. Besides safeguarding legal interests in the purchase process, lawyers are also responsible for preparing all legal and mortgage documentation. Plan to spend around $2,000 on legal costs.
Closing adjustments: Property expenses sellers have paid need to be reimbursed for by the buyer. This includes municipal property tax, utilities and maintenance fees. This will cost up to $2,000.
Land transfer taxes: Depending on the province, this may be the most expensive aspect of closing costs for buyers of a resale home, typically two per cent of the value of the property. It is a provincial or municipal fee for a change in real estate ownership. In some cities, you must pay land transfer taxes to both provincial and municipal jurisdictions. First-time home buyers may qualify for a significant land-transfer tax rebate, scaled based on the total amount of taxes paid.
Home inspection: Though home inspections cost as much as $500 for buyers, they can save major headaches later on. If there's something wrong with a property, a realtor can then advise if the purchase should be completed.
Appraisal fees: Appraisals are a tool to help buyers determine a home's market value. If a mortgage is insured, fees are generally waived. If not, budget for around $300.
Interest adjustments: This is the amount of interest paid between the closing date and first mortgage payment. The cost can range depending on mortgage size, but it's best to plan for at least $1,000.
Realtor commissions: Just because you sold your home for $500,000 doesn't mean you get to keep all of that money. When you sell a home and use a realtor, you must pay commission to the agent. Realtor commissions range considerably across Canada, but sellers should prepare to hand over approximately five per cent of the home's purchase price. The commissions are then split between the buyer and seller's agents.
Unfortunately, there's more. Other fees include home and title insurance, utility "hook up" costs and moving costs. On top of that, the volume of homes being purchased or sold is always highest during the late spring and early summer months, so be sure to plan ahead.
If the going gets tough, remember when it's all said and done, you'll have a new home.
Tip: Be sure to keep receipts for your moving costs, because if you moved for the purposes of employment, you might be eligible to claim your moving expenses on your taxes.