Ah - the dreaded closing costs!

Closing costs are a list of charges your lawyer presents to you on the near the closing date of your home.  Many people (not my clients!) are surprised at the additional costs over and above the price of the home when they show up to sign the papers. 

Below is a brief explanation of these costs.  Please note these are some of the closing costs you may encounter depending on your specific situation.  Use this as a guideline then talk with your lawyer who can provide a more realistic estimate for your situation. Or ask me! 

REAL ESTATE COMMISSIONS

In most circumstances in Ontario, the Seller pays their Listing Agent an agreed upon commission and the Listing agent is then responsible to pay the agent who brings them a Buyer that results in a successful sale. This commission is generally a percentage of the purchase price and is deducted from the proceeds of the sale by the lawyer.  The Seller is not required to issue payment to the Listing Brokerage. Please note that HST is applicable.

LEGAL COSTS AND DISBURSEMENTS

Lawyers charge fees for the services involved in reviewing documents, discharging the mortgage, and conducting various searches. Disbursements are out-of-pocket expenses incurred during the process such as registrations, searches, photocopying and supplies. Typically, a lawyer will charge between $600-$1000 for a purchase and slightly less for a sale.

LAND TRANSFER TAX

In Ontario, Land Transfer Tax is paid for by the Buyer.

HST

On resale residential purchases HST is usually not applicable unless the Seller has been claiming HST tax credits on the property.  When an offer on your home is received it will say "HST in addition to" or "HST Included in". Talk to me if you have questions as to who has to pay the HST in your transaction and your accountant about whether it applies if you have been operating a home based business.

CLOSING ADJUSTMENTS

An estimate should be made for closing adjustments for bills the Seller has prepaid such as property taxes, utility bills, and other charges. The biggest example of this is Property Taxes. If the Seller has paid the taxes beyond the date they will live there, the Buyer will owe them a refund for the number of days they have overpaid. The opposite is true if you move out and the tax bill hasn't been issued or paid yet.  A lawyer will let you know what they are once the various searches have been completed.

MOVING EXPENSES

Moving costs will vary depending on whether you are hiring professional movers or asking your friends to help you out and renting a truck. Boxes and packing supplies, cancellation and/or hook-up of utilities, mail forwarding service and take-out meals should be budgeted for. Additionally, remember that it is your responsibility to leave your home in broom swept condition for the Buyer. Some Seller's choose to hire a cleaning service to take care of this.