When buying a home in Canada, you need 3-5% of the home’s value to cover closing costs.
There are also closing costs associated with selling a home.
Learn more about closing costs for sellers in Ontario, British Columbia, and other locations in Canada below.
1. Commissions of real estate agents
The seller is usually responsible for paying the commissions to the real estate agents or real estate agents used by him and the buyer. These commissions can cost you between 3 and 7% of the sale price of the house.
Average Canadian commissions are around 5% (2.5% goes to the seller’s real estate agent and the remaining 2.5% goes to the buyer’s real estate agent). On a home sold for $450,000, for example, the total commissions are $22,500 (using a 5% rate).
You can save on commissions by selling the house yourself and avoiding the services of an agent. However, this comes with its own challenges.
2. Legal Fees
Your real estate attorney will work with the buyer’s attorney and other relevant parties (bank, etc.).
They review all legal paperwork, prepare a statement of adjustment for taxes or utilities due or prepaid, review and download the deed and mortgage, deliver closing packages and keys to the buyer’s attorney, and much more.
Legal fees can range from $500 to $1,500.
3. Closure Settings
Your attorney will prepare a statement of adjustments.
Depending on how you pay your property taxes and utility bills (i.e., prepaid or accrued), you may be required to pay what you owe as of closing date, or you may be reimbursed if you paid these expenses in advance.
This is typically included in closing costs when selling a home.
4. Bank fees
If you have a mortgage and plan to pay it off with the proceeds of your sale before the end of the term, you may be subject to prepayment penalties.
Also, banks will charge a mortgage cancellation fee to pay off the mortgage, anywhere from $250 to $500. If you are transferring your mortgage to a new property, you may be able to avoid some of these fees.
5. Costs of Repairs or Replacements
A potential buyer may request that you pay for certain repairs (or replacements) in your purchase offer, counter offer, or after the completion of a home inspection.
Some popular repair requests include:
- roof repair
- Repair of heating and cooling systems (oven, air conditioners, fans, etc.)
- basement leaks
- unstable roofs
- mold remediation
- Improvement of electrical panels, etc.
Of course, you as the seller always have the option of refusing to pay for repairs or replacements.
6. Home Staging Cost
If you plan to arrange your home to make it more attractive to potential buyers, you will incur additional costs.
7. Moving costs
Moving your possessions from one house to another will cost you.
Costs will vary depending on how many belongings you have to move, whether you are doing the move yourself or using a moving company, how far away your new location is, etc.
Costs can range from a few dollars to thousands of dollars.
8. Capital Gains Tax
When you sell your primary residence, you are not required to pay taxes on the gains (that is, capital gains) realized.
However, when this is not the case, capital gains tax is required and 50% of the gain is taxable.
Closing Costs When Buying a Home in Canada
The infographic below shows the various closing costs incurred when buying a home in Canada.
final thoughts
It’s a good idea to be prepared for closing costs, regardless of which position you’re taking in a real estate transaction (buyer or seller).
This will help you avoid unpleasant surprises!