Selling your home is often a complicated and busy time, with a list of tasks that can seem endless. There’s the preliminary work of getting your house ready, from cleaning and decluttering to making repairs and arranging for professional photography.
The journey doesn’t end once the “Sold” sign goes up. Now, you have the closing process to attend to, which also leads to another list of questions. If a sale is coming up for you, one of the top questions on your mind is what your closing costs will be. In this post, we’ll talk about the most common fees you should expect.
An unbiased assessment of how much your home is worth in today’s market is an excellent first step toward a successful sale. Book your complimentary evaluation with our team right here.
Real Estate Commissions
Real estate commissions can run from 4 – 5% of the final selling price, an amount which is split between the listing and buying agents. Many people consider this to be the most significant closing cost when selling a home, but there are a few points to remember.
Typically, a seller only has to cover them after receiving payment from the buyer. If your house doesn’t sell, there are no commissions to speak of unless otherwise stated in your listing agreement.
Many full-service real estate teams cover the cost of home preparation and staging in advance. When you think of everything you get, real estate commissions are a minor investment.
A house sold by an experienced real estate agent who knows the market typically earns more than an FSBO sale or one through a discount brokerage. If you want the best chance of selling your home at the highest possible amount, a full-service real estate team is an investment that pays for itself.
What’s the latest in West Toronto real estate? Find out in the posts below:
- Is West Toronto Real Estate Still Valuable?
- What Buyers and Sellers Should Know About Bank Appraisals
- Variable Versus Fixed Mortgages: What to Know When Rates Change
Lawyer Fees
Legal fees will be another cost before the transfer of ownership can proceed. A real estate lawyer will conduct a title search to see if there are any outstanding liens or other encumbrances on the property.
Legal expenses can range, but a straightforward transaction with no issues will generally have lower fees. If there are encumbrances, the costs can increase. In addition, higher-priced homes can be more involved and lead to higher legal fees. The costs will also include any out-of-pocket expenses for the lawyer, also known as disbursements.
Mortgage Penalties or Transfer Fees
Many mortgages have a penalty for breaking the contract early. Unless the timing of your sale perfectly coincides with your mortgage renewal, chances are you will either repay your loan early or transfer it to your new home. Either way, there could be a fee depending on the type of loan.
Open mortgages offer the most flexibility for early payment, although they may charge higher interest rates. Closed, fixed-term mortgages often have lower rates, but the penalty for leaving the contract early can be steep.
The lender will charge three months’ interest or the interest rate differential (IRD), whichever is greater. The IRD compensates the lender for any income they lose when you pay off your mortgage before the term expires. If you’ve recently renewed your mortgage and still have a significant balance, the IRD can be prohibitively expensive. This is especially true if interest rates have fallen since you originally signed up for your loan.
Under a variable-term mortgage, the lender usually charges three months’ worth of interest if you pay off your loan before the end of your contract.
If you’re buying a new house after your existing transaction closes, you may be able to avoid the worst penalties by transferring your mortgage. Keep in mind that not every contract is portable, so it’s important to understand the fine print before selling or buying a home. If you’re upsizing, you may also need to qualify for a larger mortgage, potentially at a higher interest rate.
Property Taxes
If you have outstanding property taxes due, they will show up during the title search. Essentially, the city now has a lien against your property until your debt is settled. This will come out of the proceeds upon closing, which reduces the overall amount you receive from the sale of your house.
We recommend gathering all financial documentation before listing your home to ensure there are no surprises that interfere with your sale. Often, property taxes are included on your mortgage, which is one less thing for you to worry about. If not, ensuring that your taxes are up-to-date will help both you and your buyer enjoy a seamless transition.
If you’re worried about closing costs, the best thing you can do is maximize your sale in every way possible. The resources below can help:
- Quick Guide: Preparing Your Home for the Spring Market
- 5 Tips to Make Your Home Irresistible to Young Buyers
- What Every Seller Should Know About Home Inspections
Unpaid Utilities
Before selling your home, you will want to be sure that all of your utility bills are also up-to-date. Certain expenses, like Internet and hydro, are considered personal debts that could affect your credit rating but don’t create a lien on your property.
However, in Toronto, falling behind on your water, sewer, or waste management bills can become an issue during the closing process. If there are any outstanding expenses, you will need to clear them before the buyer can take possession of your home.
Understanding your responsibilities and closing costs as a seller will make your experiences less stressful and lead to a more joyful and seamless move. If you have questions about your specific situation, one of our experts will be happy to help!
Do you want customized guidance when selling your home? Our West Toronto real estate agents are here for any questions you have. Reach out today at 416-769-3437 or email info@sidorovainwood.com to start the conversation.
