Closing day is pay day (but don't forget about closing costs)
Closing day is rapidly approaching, and you're looking forward to finally holding that big cheque. But in all your excitement, don't forget that you'll have to dole out a little bit of cash before the deal is sealed in the way of closing costs.
Closing costs are fees owed on or by closing day that must be paid for your home sale to be complete.
To give you a rough idea of what to expect, some of the most common expenses are listed below. These expenses are approximations only, may vary by region and are prone to frequent changes that may not be reflected here. Your Royal LePage real estate agent can help you further define more precise numbers.
The real estate agent's commission
This fee covers all the legwork, marketing and advice provided by your agent, as well as commission to the buyer's real estate agent (the seller pays both!). You can expect commission fees to be around 5% of the home's sale price, although they may be negotiable.
Legal fees and disbursements
When you're involved in a financial transaction as big as this, you want to be sure you are protected. Your legal professional will ensure that the buyer has made good on all terms outlined in the Offer to Purchase, and that you have met your legal obligations so the deal may close. Legal fees vary widely, and the total cost depends on the extent of services provided. You will also be responsible for disbursements (any costs related to handling your file, such as long distance calls and travel).
Utility and property tax adjustments
This might not be a cost for you, depending on how your property tax and utility bill payments are scheduled. If you prepay these expenses then you can expect the buyer to refund you the difference by closing day. If, however, you don't pay these expenses in advance, it will be you paying the buyer for the amount accrued prior to the possession date. The exact amount will be calculated by your lawyer.
Mortgage prepayment or discharge fees
Be forewarned that if you plan to pay off your mortgage with the proceeds, your bank may charge a fee for closing your account, and a penalty fee if you've paid it off early.
And don't forget about your new house. You'll want to be sure to budget extra funds for expenses related to your move (such as the moving company and utility hookups).