Resources for buying or selling a house

1.COMMUNICATION IS KEY

Your lawyer will typically make contact shortly after receiving your Agreement of Purchase and Sale and you will meet with them one to three days before Closing to review and sign Closing documents. While you may not meet with your lawyer more than once, your lawyer’s office should always be available to answer any questions you may have.

2. MONEY

Your lawyer will ask you to provide a bank draft issued to your lawyer’s firm, in trust, prior to Closing. The total amount your lawyer will request includes your purchase price less any deposit you have paid, your legal fees and disbursements, land transfer tax and any closing adjustments, less the total mortgage proceeds forwarded to your lawyer.

3. Mortgage Amount

In most cases, your lawyer will receive less than the total amount of your mortgage. Any HST on mortgage insurance fees is deducted from the funds forwarded to your lawyer. Your financial institution may also deduct additional administrative or other fees. This may mean that you will need to bring in more money than initially anticipated to finalize your purchase. Your mortgage broker can explain what fees and other costs will be deducted from the mortgage loan before funds are forwarded to your lawyer. Your lawyer will review these figures with you prior to closing.

4.Closing Adjustments

Your lawyer will determine a daily rate for prepaid expenses such as property taxes, fuel costs, fuel tank rental costs, road maintenance or common expenses. You will be required to pay a large sum up-front for these expenses if the Seller has prepaid these costs prior to Closing.

5.land transfer tax

Your lawyer also collects and remits land transfer tax on your behalf. Luckily, first-time homebuyers are eligible for a credit up to $4,000.00. First-time homebuyers purchasing a property valued above $368,000 will receive the maximum credit of $4,000.00

6.LEGAL FEES AND DISBURSEMENTS

Lawyers charge a fee for preparing your purchase documents and may charge an additional fee for preparing mortgage documents. Lawyers also charge for any disbursements they incur on your behalf such as registration of your deed and mortgage. These out-of-pocket expenses are often $1,000.00 - $1,500.00 depending on the nature of your property. Your lawyer’s fees and some disbursements are subject to HST.

7.UTILITIES

Your are responsible for setting up your own utility accounts and making any necessary arrangements for pre-authorized payments for property taxes.

8.ARRANGE HOME INSURANCE

Your lawyer requires a binder letter from your insurance company confirming your home insurance before your lawyer can complete your purchase and mortgage. Arranging your home insurance early will ensure there are no delays in your transaction.

9.FINALIZE FINANCING EARLY

Arrange with your mortgage broker or financial institution to meet and sign any mortgage documents as early as possible. Your lawyer will not receive instructions to prepare your mortgage documents until you have signed paperwork with your broker or financial institution.

10.UNDERSTAND YOUR MORTGAGE OPTIONS

There are a wide range of financial products available in today’s market and different lenders will offer different products. Ask questions to ensure that you understand the options available to you prior to signing a mortgage commitment. Mortgage brokers or specialists are also able to tell buyers the maximum mortgage for which they will qualify. This is typically referred to as being “pre-approved".

11.YOU NEED TITLE INSURANCE

As a first-time homebuyer you are likely financing your purchase through a major financial institution. All financial institutions require title insurance to protect against loss in the event of a title defect. Title insurance policies provide more comprehensive protection than a lawyer’s opinion on title. Your lawyer will purchase a title insurance policy on your behalf for a one-time cost that is generally in the range of $300.00 - $450.00.

12.CONNECT ALL OF YOUR EXPERTS

As homebuyer, you are at the center of communication for your purchase. Your experts, including your real estate agent, your mortgage broker or financial institution and your lawyer, can do a better job of advocating for you if you connect them early in the process. Don’t assume that your team of professionals talk to each other unless you have given them specific authorization to do so. If needed, consider asking your professionals for referrals to complete your team.

1.PURCHASE PRICE

Purchase price (from offer) less the deposit you have made with the offer. This would be comprised of the balance of you down payment, plus the mortgage loan funds from the bank.

2.HOME INSPECTION FEE

This one is actually due before closing... if you are doing a home inspection as part of your offer, costs for this generally range from $300.00 - $500.00, and you must pay the Home Inspector on the day he or she does their inspection.

3.APPRAISAL FEE

Your bank lender will arrange an appraisal of the property at your expense, prior to advancing any mortgage loan. Approximate cost: $250.00 - $350.00.

4.LEGAL FEE FOR PURCHASE OF HOME

Lawyers may advertise a “basic” fee, but will then add additional charges to pay for the various components of your purchase. Once these additional fees are included, which include such items as title search, registration, disbursements, photocopies, courier costs, etc., the total amount could range from $1,800.00 - $2,200.00 including HST.

5.TITLE INSURANCE

More and more lawyers are including title insurance as part of their fee. Once considered optional, Title Insurance is always a good idea as it protects you against identity theft, typographical errors and much more for as long as you own the home. Cost is a one time fee, approximately $450.00.

6.ONTARIO LAND TRANSFER TAX

This is the tax that must be paid to the Province of Ontario on registration of a Deed. The rate of tax is based on the price of the home purchased. The calculation is as follows:
- Under $250,000.00: Purchase price x 1% less $275.00
- Over $250,000.00: Purchase price x 1.5% less $1,525.00
- Over $400,000.00: Purchase price x 2% less $3525.00
- Note: If you are a first time home buyer in Ontario you are eligible for an instant refund of the provincial land transfer tax up to $2,000.00. Any tax amount due over that you must still pay.
- If you are purchasing a home in the City of Toronto, there is a second, additional tax. Toronto Land Transfer Tax amounts are similar to the provincial tax. You are exempt from this tax if you are a first time buyer and the purchase price is less than $400,000.00.

7.ADJUSTMENTS

These are utilities, taxes, condo maintenance fees, expenses that the Seller may have prepaid and which they get reimbursed for. For example, if the property is heated by oil or propane, the Buyer will be required to reimburse the Seller for the value of the oil/propane left in the storage tank. Another example, if the Seller has prepaid their municipal property taxes through to the end of the year and your closing date is 60 days before the end of the year, then the Buyer must be reimbursed the Seller the difference. The Buyer’s lawyer arranges for these adjustments with the Seller’s lawyer as part of the closing process.

8.MORTGAGE INSURANCE

CMHC - Canada Mortgage and Housing Corporation. If you down payment is less than 20% of the total purchase price of the home, Canadian banking regulations require that you pay a mortgage loan insurance premium to protect the Lender. This premium can be several thousand dollars, but it then allows you to buy a home for as little as 5% downpayment. These fees can be prepaid up front, but they are usually added to the mortgage loan amount, adding a relatively small amount to your monthly carrying cost.

9.PST ON CMHC PREMIUM

Even though the CMHC Mortgage Insurance mentioned in #8 can be rolled into your monthly mortgage payment, there is PST tax which is assessed on the CMHC premium, and this PST amount must be paid in full at Closing. For example, if the CMHC fee is $5,000.00, you don’t have to pay that fee today - it is typically added to your total mortgage loan, resulting in a small increase in your monthly payments, but there is PST to pay on it. PST in Ontario is currently 8% which ,for this example, would be $400.00, paid to your lawyer on Closing day.

10.CMHC APPLICATION FEE

This application fee ranges from $75.00 - $235.00.

11.INTEREST ADJUSTMENT

Monthly mortgage payments are due on the 1st of the month. Unless the closing date is the 1st, you must repay the amount of the interest accruing up to the 1st day of the following month, which is the Interest Adjustment Date. For example, if the closing date is March 15th but, the IAD is April 1st, interest from March 15th to the 31st must be paid.

12.HOME INSURANCE

All lenders will require you to have home insurance on your freehold property, before they will advance your mortgage loan funds (needed for Closing). Basic home insurance for an average house can range from $600.00 - $700.00 per year, and many insurance companies will require that you pay the entire year’s premium up front. If you are buying a condo, the good news is that the building insurance is already included with your condo maintenance fees; nevertheless it is also a good idea to get contents insurance for your unit, covering fire and theft.

13.LIFE INSURANCE

Many lenders will require that you have a Life Insurance policy in effect before they will advance your mortgage loan funds (needed for Closing).

14.MOVING COSTS

Moving costs vary depending upon the distance moved and the weight and volume of the possessions moved. It is wise to get an estimate from more than one mover. It is also wise to book your mover well in advance of Closing.

15.CONDOMINIUM PURCHASE

There are some special costs involved with a condominium purchase. For example, you will want a Status Certificate, which includes all important documents concerning the financial affairs of the condominium corporation, as well as the by-laws and rules that owners are required to abide by. The Status Certificate costs $100.00 plus photocopying. Also, a condominium owner pays a monthly maintenance fee to the condominium corporation. The fee will be apportioned between the Seller and the Buyer as of the date of Closing.

16.NEW-BUILD HOME PURCHASES

The biggest extra cost that attaches to new-build home purchases is HST. HST is a 13% sales tax imposed by the federal government on new homes, as well as most other goods and services. It is not applied to purchases of resale (”used”) homes. Many builders include the HST in the purchase price. Make sure that the issue of who pays the HST is resolved in the Agreement of Purchase & Sale. Read your contract carefully. There may be additional costs for a wide variety of items, including paving of the driveway, landscaping etc. On some new-build home purchases, the bill for these “extras” can be thousands of dollars.

1.LEGAL FEES

It’s usually best to budget about $1,500.00 in all. Lawyers may advertise a “basic” fee, but will then add additional charges to pay for the various components of your purchase. Almost always, once these additional fees are included, which include such items as mortgage discharge, disbursements, photocopies, courier costs, HST, etc., the total amount could total $1,200.00 - $1.500.00.

2.MORTGAGE DISCHARGE FEE

If you have a mortgage, the buyer will probably not be interested in assuming it. Therefore, you will need your mortgage company to accept an early discharge of the mortgage. Mortgage companies usually charge a discharge fee of three months interest on the outstanding principal; however, the penalty can take other forms depending upon the terms of the contract. Depending upon the size of the mortgage, these penalties can amount to thousands of dollars. If you are buying another home, the mortgage company may be prepared to waive the fee as long as you take a mortgage on your new property with the same company. This is an issue that you should discuss with your mortgage company before you sell.

3.DISBURSEMENTS

As part of the closing process, your lawyer will incur some out-of-pocket expenses that you will have to pay. You should get an estimate of these expenses when you hire your lawyer.

4.Closing Adjustments

The annual real estate taxes will be apportioned to the seller and the buyer as of the date of closing. If you have not yet paid the property taxes, you will be billed for your pro rata share. If you have pre-paid the taxes, the buyer will reimburse you for the amount you paid for the time after closing. If the home has oil/propane heating, you will be reimbursed for the value of the oil/propane in the storage tank.

5.MOVING COSTS

Moving costs vary depending upon the distance moved and the weight and volume of possessions moved. It is wise to get an estimate from more than one mover. It is also wise to book your mover well in advance of closing.

6.INSURANCE POLICIES

You should contact your property insurer to discuss your moving date, and to arrange property insurance for your new home.

7.COMMISSION

The full commission that you have agreed to pay your Realtor is due and payable on closing. You must also pay H.S.T. on the commission.

EXTERIOR

• Manicure landscaping: mow, edge and water lawn, trim hedges, weed and fertilize flowerbeds.
• Keep driveway clean and free of parked cars. Keep the garage door closed.
• Repair or replace loose or damaged shingles.
• Minimize cracks or crumbling on walkways, walls or steps.
• Make sure that from the street your property appears clear.
• Inspect appearance of interior window coverings from the curb.
• Repair any peeling paint or loose caulking on windows or other areas.
• Take steps to eliminate insect or rodent pests.
• Pick up after your pets or neighborhood animals.

Entry

While the Sales Rep works the lockbox for a key, buyers have idle time to notice details.

• Apply a fresh coat of paint to the front door and frame.
• Consider adding pots of flowering plants in the entryway if weather permits.
• Eliminate cobwebs and groom doorway area windows, porch light or decorative glass.

INTERIOR

Once inside, experts say most buyers are reaffirming their curbside decision. Clean, Clear, Light and Bright.

• Give every room in the house a thorough cleaning and remove all clutter. Hiring a cleaning service may pay for itself by adding to a buyer’s perceived value of your home.
• For a sleeker, more spacious look, consult with your Sales Rep for tips on property staging.
• Ask yourself: In a model home, would a professional decorator put your choice of items out?
• Remember: closets will be opened! Keep closets, cupboards and even your attic orderly and neat. Since you are anticipating a move anyway, consider holding a garage sale or boxing and storing unused belongings.
• If necessary, repaint or clean/replace dingy, soiled or strongly coloured walls, a light neutral shade. Bright rooms look bigger and neutral colours help buyers envision their own furnishings and decor.
• Repair dripping faucets, burned-out light bulbs or cracked windowpanes.
• Repair cracks, holes or damage to plaster, wallboard, wallpaper and tiles.