Everything You Should Know About 'Closing Costs'

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We've all heard the term "closing costs", have you been provided with an explanation of what that really means. I've outlined below things that constitute closing costs for both a sale, and a purchase. It is important to understand closing costs for a purchase do not come out of your mortgage funds. You will have to come up with this amount before the transaction closes. For a sale the closing costs would come off of the top of the sale price.

Sale:

  • Realtor Commissions: Most often both the seller's and the buyer's realtors are paid out of the proceeds of the sale on closing day. Your lawyer will write the brokerage a cheque for the amount from the payout statement provided by the brokerage. Usually in the ballpark of 5% of the price.
  • Fee for the Registry of Deeds - in the case of a sale this is usually just the fee to remove your mortgage(s), if you have one, from the register of the home you just sold. It is $100.00, no tax for each document to be removed.

Purchase:

  •  Deed Transfer Tax (DTT): This is a tax that is paid on the purchase of land in Nova Scotia. The amount varies dependent on which county your property is in, and the purchase price of the property. In HRM the DTT rate is 1.5% of the purchase price.

For example, if you are buying a house in HRM for $300,000.00, the Deed Transfer Tax will be $4,500.00.

  •  Fees to the Registry of Deeds: for a purchase these are fees to register a new deed transferring the title into the new owner's name, and registering a your mortgage on the property. On a purchase the fees would normally be a total of $200.00, no tax. That is $100 to register each the deed and the mortgage.
  • Fuel Adjustment: It is common practice for the purchaser to essentially "buy" a full tank of oil, or other heating fuel, from the seller. Rather than estimate what is in the tank, the seller will have the tank topped off prior to closing. Then the cost of an entire tank of fuel is accounted for at closing. This is usually in the range of $700.00- $900.00, and depends on the cost of oil at the time of closing.
  •  Title Insurance: This is an insurance policy that protects your "title" to the property. Your title is your right to use, buy, sell and mortgage your property. A title insurance policy costs approximately $250.00 in a situation with no complicating factors ( i.e. a known boundary dispute).

 

Some of the things title insurance would cover are:

  • Fraud or forgery;
  • Encroachments, easements, or boundary issues;
  • Zoning non-compliance;
  • Building permit issues from when the home was constructed;
  • Unknown defects in your title.

Fees that are applicable for both a purchase and a sale:

  • Legal Fees: While the price may vary slightly between a sale and a purchase, there will be legal fees on a property transaction. Our price for a standard purchase is $750.00+HST, and our fee for a standard sale is $650.00+HST. If you are not using a realtor the fee is a little higher. Read my blog on some of the ways a realtor brings value to a transaction.
  • Tax certificate: Whether you are buying or selling your home, you, and if you are buying, your lender, will want to know that your taxes are up to date and that there are no betterment charges or arrears. A tax certificate in HRM is $75.00. Outside of HRM it varies, but is usually less.
  •  Property Tax Adjustment:  Property taxes are paid in advance, based on two payments (April 1 - October 31, and November 1 - March 31).  The seller is credited for any property taxes that have been paid in advance for any period after closing. This is accounted for on closing by breaking down the yearly property taxes into a daily rate, and each the seller and purchaser are responsible for paying the taxes during the period when they each respectively own the property. Any arrears will also be dealt with on closing and the purchaser's lawyer will deduct the amount of any arrears from the purchase price in order to account for that expense.
  •  Couriers: There are often small fees charged for the use of couriers in order to send closing packages to the lawyer on the other side of the transaction. This expense usually runs in the range of $30-50.
  • Administration Fees: These are fees for miscellaneous office expenses related to your matter, such as printing and postage. We charge a flat fee of $25.00 so we don’t have to nickel and dime you for every page we print or copy.

This is not a complete list of all possible "closing costs", however, these are examples of the most common.  The tables below provide you with a summary of the estimated costs. This will vary from transaction to transaction, but it will give you a ballpark idea of what kind of closing costs you will be looking at. Based on $300,000.00 purchase or sale.

 

Sale:

Legal Fees: $650.00 + HST

Couriers: $30.00

Tax Certificate: $75.00

Administration Fee: $25.00

Title search at Registry of Deeds $20

Fee to Registry of Deeds: $100.00

Realtor Commission: 5% of the Sale Price. This example =$15,000.00 + HST

Total: $18,225.50

Purchase:

Legal Fees: :$750.00+ HST

Couriers: $30.00

Tax Certificate: $75.00

Fees to the Registry of Deeds: $200.00

Deed Transfer Tax: (Max. 1.5% of Price): $4500.00 for this example

Title Insurance: $250.00

Fuel Adjustment: approx. $800.00

Administration Fee: $25

Total: $6,742.50

Have questions for us?:

Highlander Law Group is a full-service law firm, if you have any questions we would love to speak with you. We offer a flat fee consultation service. You can come in to chat about your matter and ask questions. We will provide some advice about your options and what your next steps might be. There is no commitment after the consultation, unless you choose to proceed and retain us to represent you. You can find all our information at: highlanderlaw.ca .

By: Briana C. O'Grady, J.D.

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