I get asked what are closing costs when selling a house all the time. Usually, when I do the math and show the Sellers the number, I get a bit of a wide-eyed expression. Understandably so. With the escalation of real estate values in the Brampton area, the corresponding selling costs are also higher, as most of the costs are based on a percentage of the sale price.
Closing Costs List When Selling Your House
Real Estate Fees
Mortgage Penalty Fee
Status Certificate (If selling a condo)
Moving Costs – Truck Rental
Final Closing Adjustments
Are There Capital Gains On A Primary Residence
Sellers Closing Costs Breakdown
1. Real Estate Fees:
This is usually the largest cost in selling a house (not always, but 99% of the time it is). The real estate commission in Ontario varies from area to area, and can be 3.5% to 6% of the Sale Price, plus HST.
In the Brampton real estate market, the usual commission is 5%. This amount is normally shared half and half between the listing brokerage, and the selling brokerage. Sometimes if the listing brokerage brings their own buyer, they might give the seller a reduced commission…maybe 4%.
Each realtor, and brokerage has their own way of deciding what the selling fee will be.
2. Mortgage Penalty:
This fee can vary greatly. Of course most scenarios are fairly predictable, but there’s always the banks and the mortgage document fine-print that can blind-side you. During my time as a realtor I’ve seen some people pay upwords of $15,000 to get out of a mortgage.
Some banks charge the remaining interest to maturity as a penalty. Some banks charge the interest-differential. Basically, if you’re existing mortgage is at 5% and the going rate is at 2%, then you pay the interest difference of 3% for the remainder of the term.
Finally, some banks will do the interest differential or 3 months interest, which ever one is greater. I’m sure there are many more possibilities out there for mortgage penalties, but these are the most common ones I’ve seen.
Updating your home to get it ready for sale is a good move, and is definitely putting your best foot forward. This can involve projects like painting (which is the absolute best investment in updating or sprucing up your home). While it’s a lot of work, and if you hire someone, will cost a few thousand dollars, is definitely worth it.
Now there are many other possibilities in getting your house ready for the market. They can involve fixing old leaky taps, to replacing a furnace or roof, or both, and many other things. The bill can get quite big.
Just keep in mind, if you haven’t updated your home in many years (for example changing your kitchen or bathrooms, windows, furnace, roof, eavestroughs, etc.), then you’re going to take a hit on the price. No one will pay top dollar for a dated, and needy house.
Money spent wisely on your home in preparation for selling is truly an investment. Spend $10,000 to get back $20,000 in a few short months. Try doing that in the stock market!
4. Home Staging
Okay, this is actually a BIGGIE! There’s a common belief that home staging is about moving furniture around, decluttering. While this is partially true, home staging is so much more than that.
The home staging consultant goes through each “space” in the home and will make recommendations on what should be done to bring about a necessary emotion in the buyer. That emotion is what brings in the BIG dollars.
It can be as simple as moving furniture or bringing in rented furniture that suits the scenario better, to painting, refinishing floors, and even some light reno’s like changing doors and hardware.
At the end of the day, the extent required to stage a house is dependent on how well maintained, and modernized a home is. Because of all that is involved in a “proper” staging, you will pay well into the thousands, unless you already live in a “showroom” of sorts!
5. Lawyer’s Fee
Most law firms, or lawyers charge within a very similar range (I believe there’s actually an acceptable range that’s been created by the Law Society to prevent gouging etc.), so there won’t be too many surprises in the marketplace.
A safe range would be $1000 to $1300. It would depend on how many mortgages or otherwise need to be discharged. The more paperwork preparation the lawyer has to do, and the more complicated the closing is, will determine the level of cost.
Most closings are straight forward, and don’t require any extra charges. However, every once in awhile an anomaly occurs…
6. Status Certificate
This only pertains to a condominium scenario. Be it a condo apartment, or townhouse, it’s the exact same thing. This is a detailed document that is prepared by the property management company (unless it’s a self-run corporation) that explains the financial and legal status of the corporation.
Judgements, and litigation are examples of the possible legal issues which a condo corporation could face.
Also, the status of the property being sold as it fits in with the rules of the corporation and, whether those sellers are in arrears on the condo maintenance fees, etc.
The condo corporation has ten days to make the status certificate report, and is allowed to charge up to $100 for creating and supplying the document. I’ve never come across a corporation who charged less than the $100…lol..
There’s a number of rules and guidelines that must be adhered to in the creation of this document, that are beyond the scope of this article. Going forward, if I dig up a copy of an old status certificate, I will make it available for download! Of course I’ll have to strip out any personal references.
One thing I’ll mention is this: 95% of the time the Seller pays for the Status Certificate, even though it is the Buyer who needs this document. Don’t ask my why, but it’s just the way it’s done. Having said that, I have seen the odd transaction where, through negotiation, the Buyer has paid for his own Status Certificate…but the Seller or Seller’s agent definitely has to order it.
7. Moving Costs – Truck Rental
This is another one of those seller’s closing costs that has a very wide variance. It can be as cheap as
$100 and go all the way up into the thousands.
If you get a company to come and pack up most of your stuff, provide the appropriate wardrobe boxes, and fine-china boxes, etc. etc., then move you 3 – 4 hours away, you’ll easily spend five thousand dollars.
I did a quick quote on the Uhaul site for their biggest truck, which is 26.5 feet.
First, I’d like to add that I have no affiliation with Uhaul, and I’m receiving no compensation for mentioning them. I chose them because they offer a very convenient online interface to get a quick quote, that really seems to cover all the bases.
Here’s exactly what I booked:
- 26.5 foot Truck $39.95 + .69/km
- Damage Coverage Insurance $15.00
- Safe Trip Insurance $5.00
- Furniture Dolly $7.00
- Appliance Dolly $10.00
- Utility Dolly $7.00
- 5 Dozen Furniture Pads $50.00
- Enviro Fee (Whatever the heck that is…) $1.00
SUBTOTAL $134.95 + .69/km + TAX
Assuming a complete trip of 120 km, the truck rental would work out to $246.05, Taxes included. The only other variable is fuel. Call that $50, and you’re comfortably in for $300, including some insurance for those unforeseen situations.
All you need now, are a few strong buddies, some “après beverages”, pizza, and it’s off to the races. If your buddies aren’t available, then you can hire 2 or 3 guys through the Uhaul site, and some of the prices are pretty reasonable. I was surprised.
Moving doesn’t have to break the bank, but if you don’t want the hassle of organizing everything, and driving, etc., and you have a healthy moving budget, then go for the deluxe scenario!
8. Final Closing Adjustments
This is the very last calculations that will be done to equalize the Buyer and the Seller. Certain costs for the Day Of Closing are apportioned to the Buyer. These include property taxes and public utilities. There may be some other minor items that occur in specific situations.
Often times the Seller has things like property taxes paid up until the end of the year, or a filled up oil tank (for those who live in a Country Property). These will become a credit to the Seller on closing day.
9. Are There Capital Gains On A Primary Residence
So far, the Primary Residence is exempt from Capital Gains Tax. Hallelujah! Hopefully, it remains that way. It’s one of our only remaining safe-havens that the government hasn’t jammed their hand into, to yank out their pound of flesh. RRSP’s, RESP’s, and TFSA’s are the only other investments that come to mind…but I digress…
However, if you are selling an investment property, it’s a whole different ball-game! You are then subject to a Capital Gains Tax, if there’s profit. I won’t get into the nitty-gritty of the calculation, because it’s actually a little bit complicated, and may have changed by the time you’re reading this.
Instead, I’ll refer you to the Government of Canada website, where you can decipher the articles and double-talk, yourself…lol… Click here to go to the Canada Revenue Agency website
What Are Closing Costs When Selling A House Summary
Aren’t you glad you asked what are closing costs when selling a house? As you can see the final number is going to be quite high, but that’s why I don’t recommend moving often. I would rather a buyer stretch a little bit (only a little bit) and buy something that will be suitable for longer than initially planned for.
This way you could possibly eliminate the need to move in a few years, and extend it out to ten or twenty years. It would depend on what stage of life you’re at. Eliminating one move can save you many tens of thousands of dollars.