There are often a number of overlooked costs involved in the purchase or sale of a home.  The following list will help you identify some of the various costs involved in a typical residential Real Estate transaction.

Commission

If you use a Realtor to sell your home you will likely have to pay commission. This will generally include the commission for your Realtor and the Realtor who represents the buyer. Having said that, if you are buying a home, Realtor services are typically free. The rate of commission will vary from one Realtor to the next. Refer to the About Us section of this website for more details on our commissions.

GST

You will have to pay 6% GST  (5% after Jan 1, 2008) on most of your fees, including commission, lawyer services, transfer fees, proof documents and so forth. If you buy a house from a builder, you will also likely have to pay GST on the entire cost of the house. If you live outside Alberta, you will likely have to pay Provincial tax as well.

Proof Documents

If your home is a condominium you will have to provide the buyer with several documents proving the size and location of your unit, the status of the reserve fund, the condominium budget, and many more such documents. Hang onto everything the condominium corporation gives you to help reduce these costs.

If you are not in a condominium, you will be required to provide the buyers with a Real Property Report and a copy of the Property Title proving you have authority to sell the home, and that the home and the improvements on the land comply with all the bylaws. If these documents find any problems, you may have to pay additional fees to correct them.

In both cases your Realtor and Lawyer will work with you to identify what is required and how much it will cost.

Real Property reports typically cost between $450-$550 for a new report, and between $350-$450 for an update. Condominium documents can cost as much as $300 in you require new copies of everything. Ensure you have these documents in place at the beginning of the listing because if you have to order any of these on a "rush" basis, you can expect to pay a premium on top of the regular prices.

A good Realtor will take care of the ordering and pickup of these documents for you.

Legal Fees

Both the seller and the buyer will require a lawyer to assist in the transfer of the title and to address any issues raised by the proof documents discussed above. Usually the lawyers bill will include their fee plus any transfer or registration costs involved. See the Legal Requirements section of this website for more information. Legal fees can vary from $500 to $1000 or more.

Financing

If the seller has a mortgage on the property, they may be charged a penalty to pay it off early. Typically the fee is either 3 months worth of interest or the interest differential whichever is greater. Interest differential comes into play when the current interest rates are less now than when you got your mortgage. These penalties can be thousands of dollars, so be sure you understand up front what they will be. Some mortgages can be "ported" to your new house, refinanced, or assumed by the buyer to help reduce or eliminate the buyout penalties. A good Realtor or Mortgage Broker can help you with these issues.

Most often a seller will also become a buyer for their next house. If buyer's will be obtaining financing there will be a mortgage application fee and if the amount of financing is greater that 75% of the purchase price, there will typically be a mortgage insurance fee of up to 4% of the amount financed. See the Obtaining Financing section of this website for more details.

Adjustments

Depending on what day the home changes ownership, there are some adjustments made for things like taxes, home association fess and the like. For example, in Calgary, property taxes are paid the end of June for the whole calendar year, 6 months in arrears and 6 months in advance. If the new owner takes ownership in mid October, their taxes are already paid for the next 2 and 1/2 months so they will have to pay this amount to the sellers. Similar adjustments may be required depending on the circumstances.

Conditions

Costs to perform any conditions to the purchase contract such as home inspections are often required. The contract will spell out who pays what, but the general rule is the person requesting the condition is the one who pays for it. Therefore, home inspections are generally paid for by the buyer.

Summary

Selling

In a typical residential transaction your costs will include: commissions, GST on the commission amount, lawyer fees, mortgage balance, mortgage buyout penalties, proof documents, tax adjustments and other minor closing costs. There are several ways you can reduce these costs. Start by using a quality Realtor that charges low commission fees (like us), this alone can save you thousands of dollars. Lawyers fees also vary from firm to firm, choose one with reasonable rates. Save all your documents when you buy a house, and save any condominium documents you receive, they'll save you money when you sell. If your mortgage is up for renewal and you suspect you may be selling soon, consider an open mortgage to avoid buyout penalties when you sell.

Buying

In a typical residential transaction your costs will include: mortgage application fees, mortgage insurance fees, lawyer fees, home inspection, tax adjustments, minor closing costs and of course, the home. There are several ways you can reduce these costs. One great way is to use a Mortgage Broker instead of a bank to obtain your financing. Another is by increasing your down payment and thereby reducing or eliminating the mortgage insurance fee and at the same time reducing the amount of interest you pay on the mortgage itself. Choose a lawyer who charges reasonable rates and use the services of a good Realtor (like us). They generally will work with buyers for free and can help save you money by identifying the market value of homes and by getting you the best deal possible during contract negotiations.