Closing costs in real-estate

I am finally all moved-in in my new home, sweet home. I am glad this whole “real-estate thing” is finally over. I decided to sell my previous condo in mid-April. By the time it was ready for sale, it was the end of May.

It was listed early June and sold on the 14th at over-asking. I was lucky to be able to buy my current home shortly after. That being said, the completion and possession dates were mid-August for both condos.

I had been living in boxes and more or less camping since the end of June. I was happy to take all my belongings out of those boxes.

Closing costs are payment for all the necessary items to conclude or “close” a real-estate deal. These fees are paid by both sellers and buyers but are different.

For the 2 transactions, I had budgeted $ 29K in closing costs….they came in at just above $ 25K. Staggering, isn’t it?

These fees creep-up very easily and add-up to big dollar amounts. They are always a surprise for most people, including myself. Here is a non-exhaustive breakdown of them:

When selling

• Realtor commission:  in BC, it is usually 7% on the first $ 100K and 2.5% on the remaining balance
• Legal fees: to clear the title. The fees are lower when selling as there isn’t much involved.
• Mortgage penalty, if applicable: if you break your mortgage before term, lenders will charge you a penalty, either 3-month interest or Interest Rate Differential -IRD-
• Mortgage discharge fee, if applicable: most lenders will also charge you an administrative fee to discharge the mortgage

Upon selling, the buyer will usually reimburse you for your share of the property tax and strata fees -if you buy a condo-.

When buying

• Legal fees: these will be higher for purchasing, as more work is involved
• Property transfer tax: cash grab from most governments. In BC, the rates are: 1% on the first $200K, 2% on the remaining balance up to $ 2 millions, 3% up to $ 3 millions. If you are a first-time home-buyer and your property is under $475K, you are exempt from this tax in BC.
• Down-payment: your biggest closing cost by far!
• Mortgage default insurance: if you buy with less than 20% down
• Mortgage application fee: most lenders will waive this, but some will charge you an administrative fee to process your application
• Title insurance: most lenders will require this. It is to insure you are the rightful owner of the property
• Appraisal fees: if you buy a detached house, the lender will ask for an assessment of its value to insure you are not overpaying. It is less common for a condo
• Land survey: for detached houses only. A lender may require a detailed plan of the land showing property limits, easements and rights of way.
• Interest adjustment: You need to pay the interests on the mortgage for the month you close
• Other adjustments: you will most likely have to reimburse the seller  for their share of the property taxes and strata fees
• Fire insurance: lenders require to be first payee in case of a fire. Insurance companies will charge a fee to prepare the applicable document

Other fees that are not included in the statement prepared by lawyers/notaries:

• Home inspection: if you can do one, that is great but it costs around $ 500.00
• Moving company: unless you have willing friends, you will need people to move your belongings to your new place
• Home insurance 
• Utility hook-up & transfer: BC hydro charges $ 12.50 to transfer your account. Your cable company may also charge you fees
• Locksmith: it is probably a good idea to have the locks of your new place re-keyed

As you can see the list is pretty long! When it comes to closing costs, you are better off thinking “high” than “low”. They will always be higher than what you think.

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