What’s the Deal With Closing Costs?
Oct. 02, 22 | Buying
People often overlook the various expenses they can expect when moving and this can cause some serious stress when something comes up unexpectedly in the buying and selling process. We often calculate our spending budget or our desired sale price, but we don’t take it to the next step and look at what other costs we need to factor in.
Expenses to Expect
Let’s start first with Buyers, and unfortunately Buyers seem to have more items to consider but for good reason. Most of the costs that are incurred are relevant to the purchase of a home. Buyers need to be aware of their pre-approved mortgage limits, but also factor in what their down payment (deposit) will be. Often the deposit comes from funds the Buyer has on hand and can range anywhere from $10,000 up to 10% of the asking price. The deposit is necessary to bind the Agreement of Purchase and Sale, so it is important that these funds are liquid and accessible. Subsequent to your pre-approval, you also need to consider what your down payment will be.
A down payment can be as low as 5% of the value of the home or 20% or greater if you want to avoid mortgage insurance (just another expense to consider that will be paid monthly with your mortgage payment). Buyer’s are also responsible for paying the land transfer tax which varies with the home price.
If we look at the average price of a home in our region of $750,000, the Buyer is looking at paying $11,475 in addition of the purchase price. And if you are a first time home buyer, you can catch a little break on this one assuming you meet the eligibility requirements so be sure to check that out if you think you might be eligible.
Another break that Buyer’s typically get is their Realtor fees which are paid out by the Seller in the majority of cases. If you’re buying a new construction home or For Sale By Owner, have a conversation with your Realtor whether commission fees are applicable to you. Both Buyers and Sellers will be responsible for paying legal fees, and they can vary from $1,000 to $1,500 typically.
Some other closing costs that you could run into:
- Home Inspection
- Property Appraisal
- Property Survey
- Title Insurance
- Status Certificate (Condominium)
- Moving Costs
- Utility hook up fees
- House cleaning
- Appliances & furnishing
Whether you are a Buyer or Seller it is a good idea to be prepared for closing costs irrespective of which side of the transaction you are on. This will help you avoid unpleasant surprises and if you don’t end up using those funds you set aside, considering investing in your next real estate property.
If you want to discuss other expenses to budget for or even what’s happening in the market, I am always ready to have that conversation. All you have to do, is reach out by filling out the form and we can chat more over coffee.