The Hidden Costs of Closing
How to Identify and Budget for the Little-Known Expenses of Buying a House
Many first-time home shoppers are unaware of the many costs incurred during real estate transactions. A skilled agent can sometimes negotiate a bargain where the seller is responsible for at least a few of these costs, just to speed things up, but more often than not, it’s mostly the buyer that ends up paying.
Remember to budget for these expenses when you’re ready to close the sale:
Cost 1: A Credit Report
Credit reports are always a smart choice, though they are usually performed during the pre-approval process, before the finalization of the sale. Often, mortgage brokers include the cost of these reports in your application, but at times it may be added into the rest of the closing costs of the transaction.
Cost 2: CMHC Appraisal
In order to confirm that a property is valued at correctly, the CMHC usually asks that the home be appraised during the mortgage insurance process. This is generally around $300, and is paid for by the buyer. This cost is tricky, as it can come up at any number of times throughout the process. Don’t worry, though — we can walk you through this process and explain your options.
Cost 3: Title Search and Insurance
Especially since it’s not a big cost, it’s best to pay $15 to perform a title search you’re your prospective property. Once you have done this, you can purchase title insurance, and this in turn will protect you against any claims that may arise on the new property you are about to purchase. Title insurance usually costs approximately 1% of the property’s value.
Cost 4: Documenting and Recording Fees
Documentation and Recording Fees are charges are for the Land Titles. Different areas will charge different fees, depending on the procedures of the locality. An experienced agent can help you to discover exactly what these are.
Cost Five: Pro-Rated Property Tax
Often, property taxes are pro-rated and split between buyer and seller to reflect the due date of the taxes and the possession date on the transaction. Condo fees, as well as other recurring expenses incurred from ownership of the property, will be split similarly. Insurance is generally paid in advance for the year, as well — something which many buyers fail to account for.
Cost 6: The Unexpected
In home buying, unexpected costs are bound to pop up. The best way to prepare for these is to determine 1.5% of the property’s price, and put it aside for such fees until the final transaction is complete.