Closing Cost

    

CLOSING COSTS

 There are additional closing costs that are often

unanticipated by buyers. The following are typical

costs incurred at the time of closing, and some

 information related to closing issues that all

buyers should be aware of before signing any

contract.

DEPOSIT

With or after acceptance of an offer to purchase you have to 

submit a depositcheque, which will be held in trust by the listing

 broker if the offer is accepted. The cheque is usually between 

1% to 10% of the sale price or more depending on the

circumstances, cities, and closing date. The cheque is

usually certified and deposited the day after acceptance.

SURVEY 

Some lenders will ask to have a recent survey showing

all property lines, fences and building dimention with cost

range from $500 to $1000.

TITLE INSURANCE

An alternative to an up-to-date survey is title insurance. There are a

variety of insurers that provide this product including the Buyer's

lawyer. The cost of title insurance is based on a sliding scale

depending on the value of your purchase.Typically, costs are

between $300 and $500. A note of caution: title insurance

doesnot correct title problems. It merely compensates the Buyer

 as a result of negative impact resulting from a title defect.

LAND TRANSFER TAX

Purchasers of real estate in Ontario are required to pay provinvial

Land Transfer Tax on closing. It is paid directly to the Province of

 Ontario. It is based on the following formula:

  • 0.5% is paid on the first $55,000 of property value;
  • 1% is paid on the next $195,000 of property value;
  • 1.5% is paid on the next $150,000 of property value
  •  2% paid on any value in excess of $400,000

Tepically $4,475 in provincial Land Transfer tax is owed on the first

$400,000.00 with 2% payable on any value in excess of that amount.

First time Buyers may be eligible for rebates up to $4000 under the

provincial Land Transfer Tax. Legal advice should be sought as to

eligibility.

LEGAL FEES & DISBURSEMENTS
You will require the services of an Ontario lawyer to act on your
behalf to close your house purchase.

Your lawyer will charge you for services, including title searching,

 and for his/her expenses (disbursements).

Before hiring a lawyer, you should ask him/her for a complete

breakdown of fees, disbursements( photocopies, tax certificates,

zoning clearance and work orders, couriers, registering of the

deed and mortgages, searching executions, mortgage schedules,

status certificates for (condominiums) and other incidentals. and

mortgage work. Most legal work for home purchases exceeds

$1,000 and can be much higher under certain circumstances.

STATEMENT OF ADJUSTMENT

Balance due on closing - basically the balance due on

closing is the difference between the sale price and the

amount of your deposit that was presented with the offer.

However, there are certain other items that will be adjusted

at the time of closing.

Taxes - if the Seller has paid taxes for

the full year, the Buyer will be responsible for his/her portion

from time of closing until the end of the year.

Fuel - if the property is heated by oil, then the tank will be

filled by the Seller on closing, and the Buyer will be charged

on the adjustment with a full tank of oil (usually 200 gallons).

Utilities - all utilities and gas that are metered will be read

on closing and the seller will be responsible for them up to

the date of closing.These are normal adjustments. Particular

attention should be paid to new construction transactions,

especially condominiums. There are numerous additional

adjustments in these purchases. These adjustments, including

the Ontario New Home Warranty Fee, could amount to $3,000

or more.

PROFESSIONAL HOME INSPECTION

This is usually around $300 and up. The cost will vary

with the size of the home being purchased and the

inspection company used.

HOME INSURANCE

This varies. Minimally, costs start at $500/Year, 1st mortgage must

be noted on policy.

(Home insurance has become a serious closing issue. See details below.)

MOVING COSTS

These vary from $75 per hour and up, depending on the company

and the number of movers. It will also depend on the size of the

 vehicle and the time of the month and year you are moving.

FIRST MORTGAGE COSTS

Interest adjustment - This is something most Buyers do not

understand. Basically, if you are arranging a new first

mortgage, your lawyer will receive the mortgage monies

from the mortgage company on the morning of the closing

date. However, most mortgage companies use the 1st or

 the 15th of the month as a payment date. Therefore, if you

are closing a deal on, say August 10th, the mortgage company

 will deduct from the mortgage monies interest from date of

closing (10th) to the first of the following month (i.e. September 1st) -

interest adjustment date - and your first payment will then

commence the 1st day of the following month (i.e.October 1st), and

 continue on a monthly basis thereafter. Example: on a $100,000

mortgage at 5.5% interest from the 10th to the 1st of the

following month, interest would amount to approximately $316

and instead of getting $100,000 from the mortgage company

 on closing, you will receive only $99,684.(Interest adjustment

costs will not affect every mortgage, as some will have payment

commencing one month after closing.) Loan processing or bank

appraisal fee - Usually about $300. High ratio mortgages will

demand a higher processing fee. A high ratio mortgage is one

in which the Buyer is seeking financing in excess of 80% of

the purchase price, or in some cases the approved value

of the property.

SECOND MORTGAGE COSTS

Usually require the payment of additional legal fees, appraisal and

brokerage fees. These vary dramatically, depending on the

transaction and the risk as perceived by the lender.

HST

Re-sales - although most used residential re-sales are exempt from

HST, almost all services involved with the transaction will be subject

to HST, e.g.: real estate commissions, lawyer's fees, appraisals,

processing fees, home inspections, insurance, moving cost, etc.

Substantially renovated houses - are subject to HST if

 purchased from the builder/renovator.

Commercial properties - are subject to HST. This is a complex

area and individuals should seek advice from a specialist, e.g.

accountant, tax lawyer.

New housing - is subject to HST. It is also a complex topic. Often

the HST will be included in the purchase price. There are also H.S.T.

rebates available in a number of instances.

Vacant land - this is a very complex HST area. Vacant land attracts

HST in most, but not all cases. As a cautionary note assume that it

does until the nature of the land, its use and its ownership can be

clarified by a specialist.

CLOSING DATE

Just a note at this point about the procedure on the actual closing

date. It will be necessary for your lawyer to obtain the money from

the mortgage company on the day of closing.

Lawyers often have many deals closing on busy days, and it

is often difficult for them to arrange a closing time until later

in the day. It is probably not adviseable to plan for an early

morning move into your new home. Please discuss this with

your lawyer. Your lawyer should be in touch with you within the

week prior to closing to arrange an appointment to sign and bring

 in the necessary closing money (appointment

probably day prior to closing).

INSURANCE CONCERNS

A number of insurance concerns have developed in the real

estate industry that could have a financial impact for a Buyer

on closing. Although an exhaustive explanation is not possible

here, Buyers should be aware of the following:

1. Knob and Tube wiring
This is an older form of ungrounded wiring that some insurers may

not cover or may only do so at greatly inflated premiums. In some

cases buyers may be denied insurance altogether or until such time

as the house has been rewired. These costs could easily exceed

$5,000.

2. Hydro Service
Insurance companies are refusing to insure properties with

60-amp service and homes with fuse panels instead of breakers.

As in the case of knob and tube wiring, hydro service may have

to be increased to at least 100-amp service before insurance

can be obtained.

3. Oil Tanks
Insurance companies are refusing to insure homes with oil tanks

that have not been certified by a Technical Standards and

Safety Association (TSSA) technician. This is particularly true

for oil tanks that are older than 25 years. In addition, fuel oil

companies will no longer provide fuel oil to homes with tanks

that have not been certified. Cost of a new fuel oil tank can be

in the range of $2,000. Underground fuel oil tanks are now subject

to strict regulation and in most cases must be removed.

Seek advice before buying a property with an underground tank.

4. Other Issues
Generally, insurance companies have been shedding risky

(in their opinion) policies. In some parts of the country the age

and type of structure have also become issues. In Ontario,

galvanized steel plumbing is becoming an insurance concern

as is in sulbrick siding in some cases. Properties owned by

absentee owners/landlords may also raise concerns.

 
Sam Dabbagh

Sam Dabbagh

Sales Representative
CENTURY 21 First Canadian Corp., Brokerage*
Contact Me