When potential seller clients begin conversations with us about selling their home, one of the first questions they usually ask is “What are your commissions?”. While this is an important question for your calculations, commissions are not the only closing cost involved with selling your home.
What other closing costs are there? There are some costs that will apply no matter what type of property you are selling.
A lawyer will need to handle the sale of your home. There are different rates depending on who you choose for your lawyer. This will vary depending on your location, too. I have been told that lawyers are somewhere around the $900 mark in Edmonton, however, they are usually $1400 or more here in Fort McMurray. Your lawyer will be able to transfer the title from your name to the buyer(s)’s name on possession day and they will be the ones to send you the money (or whom you will need to pay a shortfall) to in the days leading up to possession day.
Commissions vary throughout the city as there is a competition rule stating that REALTORS® cannot say that their is a "fixed" industry standard (there is not). There will be certain brokerages in town that have a set rate, but it is best to ask your agent what commission they charge. Commissions are negotiable, but some agents (including us) choose not to negotiate on the rate they offer. This commission will be split between the listing agent and the buyer’s agent. If you remember when you bought the house, you didn’t pay commissions since the seller is always the one to pay the commissions for the transaction.
GST (currently 5%) must be paid on commissions, so don’t forget to include this in your calculations.
Amount owing on your mortgage:
Sometimes this number will be the determining factor for whether or not you sell your home, so we highly recommend you find out how much is still owing on your mortgage. You can get this information if you have online banking with your mortgage provider or by calling them. If you have a mortgage on your home, then this will need to be paid off in order to sell your home, however, there are different rules if you want to port your mortgage (transfer it to a new home) so it is best to ask your mortgage provider. If you have a line of credit attached to the mortgage, then this will likely also need to be paid off, so it is best to find out in advance.
Penalties for closing your mortgage early:
If you have a mortgage, it is a good idea to call your mortgage provider and ask if there are penalties for closing your mortgage early. Sometimes these penalties are low, but they can also be unexpectedly high so it is worth finding out (especially if equity is tight). I had a client once whose penalty was $43,000 and so they decided not to sell at that time. I am not a mortgage broker, however, I have been told that there can sometimes be an option of porting your mortgage (transferring it from your existing home to a new home) which would eliminate the penalty fee. Definitely worth making that call to get all of the details!
If you have any overdue property taxes, then the amount will be taken off your sale proceeds so best to find out in advance if you are behind in those payments.
Depending on the type of property you are selling, there are some other closing costs to be aware of:
: If you own a home with land (for example, single family home, townhouse, duplex or mobile with land), then you will have the option to offer title insurance to the buyer(s). This can be offered in lieu of a real property report (RPR). An RPR is a survey of the land whereby it shows where the house and garage where, where the deck and fence (if applicable) are so that you know if your fence encroaches onto your neighbour’s property, for example. Title insurance is much cheaper than an RPR (I have been told RPRs can be $1800-$2500, whereas title insurance is cheaper: $229 for a $500,000 property, for example) and will be handled by your lawyer behind the scenes as long as it is included in the purchase contract. Your REALTOR® can help you calculate approximately how much title insurance will be given the estimated sale price of your home.
If you own a home with condo fees (for example, apartment/condo, townhouse with condo fees or mobile with condo fees), then you will be responsible for gathering a full set of condominium documents for the buyer in order for them to decide if they are going to commit to buying your home. These condo documents can be obtained from your condo management company. Sometimes they will have an entire package for you to order and sometimes you will need to order each document individually. Sometimes they will have a website where you can order them and sometimes it will require a phone call or email to the management company. Your REALTOR® will help you collect these. The price varies significantly depending on the management company. Some mobile parks give the documents for free, but I would recommend estimating a cost of $500 (on the high end) to collect these documents for the buyer.
If you have a wood burning fireplace, then there is a very good chance that a buyer will ask for a WETT (wood energy technology transfer) inspection report in order to proceed with buying your home. This report will tell you and the buyer if the fireplace is in good condition (no fire hazards) and meets the code requirements. It is advisable to get a WETT inspection as early in the listing process as possible so you are ready for when a buyer places an offer on your home. We can refer you to a WETT inspector, but the cost is usually $350 for 1 fireplace. When you get the report from your inspector, you can leave it on the kitchen counter for buyers to see when they come through your home.
If you have a wood foundation, then you will need to obtain a PWF (preserved wood foundation) certificate before listing your home for sale. This certificate will tell buyers that your foundation is in good condition and does not need repair. These certificates are approximately $2500 (plus GST) and can take some time to get, but again, your REALTOR® will help you with the process.
If you own a home older than a few years old, then it is advisable to get a pre-inspection for your home. This closing cost is optional as the buyer will have their own inspection on your home, but it is recommended (highly recommended in older homes) so that if there is something that needs to be repaired, then you can repair it before a buyer comes along. Large “issues”, such as foundation cracks or moisture issues, can scare a buyer away and they can end up leaving a contract when the deal is pending, so it is best if you can fix those “issues” right away. If the report is clean, then you can leave it on the kitchen counter for buyers to see when they come through the home and they will feel more comfortable placing an offer on your home. This is especially important to do if you own a more expensive home. Home inspections cost approximately $500-550 and your REALTOR® can give you a list of recommended inspectors in town.
If you are building a new home, we advise that you speak with your tax accountant or CRA about whether or not you will need to pay GST on the sale of your home.
If you have an alarm system on your home and you have signed up for a contract, be aware that if you call to cancel that contract, there will likely be a penalty fee. Please contact your provider to find out what that fee will look like. Sometimes a buyer will take over the contract for you, but this, I find, is rare.
If you have any questions about closing costs, please feel free to contact your knowledgeable A-Team REALTOR® and we’ll be happy to help! This is a fairly comprehensive list of closing costs, but there are others which are not discussed here (for example, liens on your property title). Don’t worry though - we go through these costs at the listing presentation as we want to ensure you have all the best information so you can make the best decision. For information about selling your home or to set up a time to discuss these closing costs with an A-Team REALTOR®, visit our sellers page.
Thanks for reading and have a great day!