Buying a Home FAQ
How Much Does It Cost to Close a Real Estate Purchase Transaction?
When you're buying a house, the total closing costs are a combination of various fees, including your down payment, inspection fee, mortgage fee, legal charges, and adjustments to your purchase agreement Ontario. Here's a breakdown of the costs you can anticipate:
Typically, you'll put down 5% to 25% of the property's purchase price. If your down payment is less than 20%, your mortgage will incur a mortgage insurance premium charge, which will be calculated based on the mortgage value.
Banks often charge an appraisal and application fee for processing your mortgage, typically around $350.
We highly recommend conducting a property inspection before finalizing the private house sale Ontario paperwork. This inspection, typically costing around $500, can uncover potential issues, allowing you to negotiate with the seller or make an informed decision to walk away from the deal.
Legal costs differ and include title searches, mortgage registration, title insurance, deed registration, and other potential costs to finalize your transaction, such as printing, faxes, and courier charges. Here are some average legal costs you may encounter:
- Lawyer Legal Fee: $695.00 – $1,000.00
- Title Search: $180.00 – $240.00
- Registration of Deed: $82.00
- Registration of Mortgage: $82.00
- Execution Certificates: $23 – $45.00
- Title Insurance: Starts at $282.00 (based on property price or registered mortgage amount)
- Office Expenses: $40.00 – $50.00
- Land Transfer Tax: Varies (use a Land Transfer Tax Calculator to estimate)
Overall, you should budget approximately 1.5% of the purchase price for closing costs, excluding your down payment.
What is the OREA Form 100 and why is it important?
OREA Form 100, also known as the Agreement of Purchase and Sale, is a crucial document used in real estate transactions in Ontario. It outlines the terms and conditions agreed upon by the buyer and seller, including the purchase price, deposit amount, closing date, and any conditions that must be met before the sale can be finalized. This form is essential as it legally binds both parties to the terms of the sale.
What steps should I follow for a private house sale in Ontario?
Private house sales in Ontario can be a cost-effective alternative to using a real estate agent, but they require careful attention to paperwork and legal procedures. Here are the key steps:
Price your home: Research market conditions and consider hiring a professional appraiser to establish a fair price.
Prepare your home: Make necessary repairs and improvements to enhance your home's appeal.
Market your home: List your property on relevant websites, put up 'For Sale' signs, and consider open houses.
Prepare necessary documents: This includes the OREA Form 100 or Agreement of Purchase and Sale, and any disclosure documents about the state of your property.
Negotiate and accept an offer: You'll negotiate directly with potential buyers or their agents.
Close the sale: Work with a real estate lawyer to ensure all paperwork is in order, including the transfer of the deed and other closing documents.
What are the typical contingencies in an Agreement of Purchase and Sale?
Contingencies in an Agreement of Purchase and Sale are conditions that must be fulfilled for the transaction to proceed. Typical contingencies include:
Financing contingency: The buyer must secure a mortgage or other financing to purchase the property.
Inspection contingency: The buyer has the right to have the property inspected and can renegotiate or withdraw the offer based on the findings.
Appraisal contingency: If the property's appraised value is lower than the purchase price, the buyer can renegotiate or cancel the agreement.
Title contingency: The title to the property must be clear, meaning there are no liens or other claims against it.
Sale of existing home contingency: If the buyer needs to sell their current home to finance the purchase.
What Adjustments are Made to the Purchase Price at Closing?
Common adjustments to your purchase price include the deposit you made, any property taxes the seller has paid, and your share of the condo fees, if applicable. If you're buying a new home, your HST rebate will also be calculated as an adjustment on closing.
Why is Title Insurance Necessary?
Title insurance safeguards you against losses related to title fraud, survey and title issues or defects, and challenges to your property ownership. It provides coverage for issues that may arise in the future and for problems that occurred before your home purchase. You only pay the premium once, and the coverage lasts as long as you own your property.
Title insurance generally covers title risks like:
- Solicitor errors or fraud
- Unpaid property taxes or local improvement charges by a previous owner
- Survey errors or illegibility
- Encroachments (before or after closing)
- Violation of municipal zoning by-laws
- Unmarketability of title
- Defects in the title
- Invalidity of the mortgage on title
- Easements (other than usual utilities easements)
- Violation of subdivision, development, and other agreements
- Priority of certain construction liens
- Fraud or forgery (prior to and after closing)
What If My Spouse Is Not Available During Closing?
If either you or your spouse will be away during the closing date, inform your lawyer as soon as possible. They can draft a power of attorney to let a third party or your spouse sign the necessary closing documents on your behalf. Ensure you verify with your mortgage lender that they accept documents signed via power of attorney.
When Can I Receive the Keys on Closing Day?
The keys to your new home will be given to you once all closing documents have been exchanged, funds have been received, and the deed has been registered. Typically, these conditions are fulfilled between 2-5pm on the closing day. Plan your moving schedule accordingly if you intend to move in on the same day.
Should I Commission a Property Survey?
The transfer of title you receive upon closing only conveys the land described in the transfer and any structures on it. A property survey shows the relative location of these structures to the land and the property boundaries. Although our lawyers usually review an existing reference plan or plan of subdivision to verify the lot location and size as part of the OREA offer to purchase, these are not surveys. The only way to accurately determine property lines and building locations is through an up-to-date survey.
An existing survey may not reflect changes made after its creation. If you're getting a mortgage, your lender will likely require either a survey or title insurance. The latter is typically the least expensive option.
A survey can reveal if part of the building you intend to purchase encroaches on another person's land, or if a neighbour has occupied part of your land for a period of years, thereby gaining ownership. It can also show if buildings or additions contravene municipal by-laws and regulations. If you choose to accept an existing survey, it's your responsibility to ensure it accurately describes the buildings, apparent property boundaries, and any property improvements. The cost of a new survey depends on the complexity of the property description, typically ranging from $1,000.00 to $2,500.00.
DISCLAIMER: The information provided on our website is for general purposes and is not a substitute for legal counsel. It is provided without any express or implied warranties concerning its accuracy or completeness. Always consult with a lawyer for legal advice.