For anyone thinking of selling a home in Ontario, cost certainly becomes a factor. Typically when people think of the real estate market, they think of the cost for a potential buyer. However, sellers must deal with certain closing costs when selling a home that the homeowner might not have thought of. If this is your first time selling a home, knowledge of what costs you are responsible for, will prepare you for when you list your home for sale.
When selling your home, you may not realize what costs fall to you before the house passes to its new owner. For example, if you own a condominium, any unpaid maintenance fees must be paid before closing. Municipalities generally require home owners to pay property tax, either yearly or twice a year, so check that they are up to date.
You will be responsible for a discharge fee of up to $270 paid to the bank if you sell your home before you have paid off your mortgage. If you have a closed mortgage, your bank might also require you to pay prepayment charges, which can equal several months’ mortgage payments. These payments generally are based on the number of years left to pay, and the interest rate. It is possible however, if you are buying another home, and the price is comparable, you could transfer your mortgage to the new property. It is also possible you will need to pay any interest on your mortgage since the last payment was made, as well as the amount payable on the mortgage.
Real Estate Commission
If you decide to sell your home on your own, you will of course avoid any real estate commissions, and keep more of the money for yourself. However, it’s much easier to use an agent who has access to resources most people do not. This means, you will pay both the listing agent, and the buyer’s agent a commission of approximately 3 to 7 percent of the selling price. Don’t worry, the agents will split that commission between them, you will not have to pay it twice. This split isn’t always equal, with some listing agents securing 7.5 percent, and offering a buyer’s agent 3 percent.
Legal Fees and Taxes
Legal fees are another concern for a home seller. These include sales taxes on the total amount paid, including agent‘s commissions, the cost of disbursements like registration fees and lawyer’s fees. Lawyer’s fees can range to approximately $500, and related expenses associated with using a lawyer can up the fee another $200. You will also have to add the government to your list of costs to factor in, if you earn money from the home. For an income property, you must pay capital gains tax on your income tax return.
For a seller, there are many costs associated in the closing of the sale of your home. Once your house sells, you will still be living in it until the day it closes. You must still pay property taxes, utilities, condominium maintenance fees and possibly prepaid municipal assessment. These fees associated with living expenses continue until you move, so if your closing date is the end of the month, you will pay until that time. If you have your utilities on prepaid payments, it’s possible you can ask your buyer to reimburse you for the unused amount for the month.
You may also have to pay to have your utilities disconnected, or transferred to your new residence prior to moving. These can include telephone, heating, cable TV, plus electrical and water services.
You must factor in the cost of moving to your new home as well. Many home sellers forget to add this expense to their budget and may find themselves in a bind. Remember to add the cost of a moving company (if you use one), buying boxes or renting them, moving insurance, any storage costs and insurance, and if you choose to have a company help you pack, you must pay them too.
Land Transfer Tax
Land Transfer Tax can add up in a big way for a home seller, or buyer. If you purchase land in Ontario, you will have to pay the Land Transfer Tax which is based on the amount the property sold for. It also takes into account the amount owing on the mortgage, and any debt assumed in the land purchase agree