Understanding Fees When Selling a Home in Canada

Fees Associated with Selling a Home in Canada

When selling your property, there are several fees to consider, and they are usually paid out on the closing date by your attorney. These fees may include real estate lawyer costs and other closing-related expenses, such as land transfer taxes. But there are also a number of additional costs that may arise, depending on your situation.

Mortgage Pre-Payment Penalties

If you still have a mortgage on your property and plan to sell before your mortgage term ends, you could face pre-payment penalties. This happens when you break the mortgage contract early, and the cost of doing so will depend on the type of mortgage you have.

Open Mortgages
With an open mortgage, you can break the contract without incurring penalties, making it easier to sell your home early. Open mortgages offer more flexibility, but they may come with higher interest rates.

Closed Mortgages
On the other hand, closed mortgages have set conditions, and breaking the contract before maturity typically results in penalties. If you have a closed mortgage with a fixed interest rate, you'll generally need to pay either three months' worth of interest or the Interest Rate Differential (IRD), whichever is higher. The penalty can be significant, especially if interest rates have dropped since you signed the mortgage.

For example, if your mortgage balance is $300,000 and your current interest rate is 6.59%, but the market rate is now 4.74%, the IRD penalty could total $11,100. This is the type of cost you'll want to factor into your selling decision.

Home Inspection Fees

In a buyer's market, it's common for buyers to request a home inspection before moving forward with a purchase. While this expense usually falls on the buyer, some sellers choose to have their own inspection done before listing the property to provide a report to prospective buyers. This proactive approach can sometimes help instill confidence in buyers and lead to faster offers.

Rental Costs for Appliances

If you have appliances like a water heater or HVAC system that are on a rental contract, a buyer may not want to assume these rental agreements. In these cases, you might be required to pay off the remaining rental fees before the sale can go through. This can include legal fees if there is a lien attached to the rental equipment.

Home Staging Costs

Home staging, while not mandatory, can significantly enhance the appeal of your home and help it sell more quickly and at a higher price. In fact, staged homes can sell up to 30% faster and for 20% more than non-staged homes, according to recent studies. Staging can involve decluttering, rearranging furniture, painting, or even renting new furnishings. Virtual staging, which enhances photos digitally, is a cost-effective alternative if your home is vacant.

Real Estate Lawyer Fees

Who Pays for Real Estate Lawyer Fees?

Both the seller and the buyer are typically responsible for their own legal fees. The seller’s lawyer handles the closing process for the seller, while the buyer’s lawyer manages the buyer's interests.

What Does a Real Estate Lawyer Do for the Seller?

For sellers, the lawyer’s main job is to facilitate the legal aspects of the sale, including paying off any remaining mortgage and ensuring the property title is transferred properly. Other tasks include:

• Reviewing the Agreement of Purchase and Sale (APS) and other legal documents
• Negotiating terms with the buyer
• Preparing the deed
• Addressing any title issues or deal complications
• Closing the transaction and ensuring all conditions are met
• Coordinating the handover of keys to the buyer’s lawyer

What Does a Real Estate Lawyer Do for the Buyer?

The buyer’s lawyer conducts title searches to confirm ownership and ensure there are no liens or debts on the property. The lawyer will also ensure all the buyer's legal interests are protected, including:

• Arranging for title insurance
• Calculating land transfer taxes
• Drawing up the mortgage documents
• Ensuring property taxes are up to date
• Closing the transaction and facilitating the handover of keys from the seller's lawyer

Understanding the Costs of Selling Your Home in Canada

Selling a home in Canada is a significant financial decision, and it's important to be prepared for the various fees associated with the process. From mortgage pre-payment penalties to lawyer fees and home staging costs, these expenses can add up quickly. It's essential to factor these costs into your budget so that you can plan accordingly.

If you’re selling your home, Diane Walker is here to help you navigate the complexities of the Canadian real estate market and ensure that you understand all the fees involved in the process. With the right guidance and preparation, you can sell your home successfully and efficiently.