What Does It All Cost?
A lawyer colleague used to like to point to his office walls and say to his clients, "You don’t see any groceries. We don’t sell shoes, hats or cars -- all we sell is time -- so buy it wisely."
Maybe that’s putting it too bluntly, but the fact is that legal fees are really based on the time the service takes. Many lawyers, like myself, don’t charge for quick telephone advice for existing clients. After that, the cost is related to the time involved and the complexity of the matter. Frankly, when it comes to a real estate transaction, the purchase price also comes into play. This is similar to real estate agents who charge a percentage of the purchase price. While the percentage is negotiable, the real estate agents all pretty well charge the same percentage.
Lawyers are one of the few professions that are charging less than half of what the same transaction would have cost 15 years ago. There really must be something wrong with us!!!
You will find that my costs are less than the suggested tarrif for the most part. The same will be true for most lawyer, just how much less depends on the particular law office policy.
Always to be sure to clarify the costs with your lawyer and shop around - you get what you pay for!! Also, when shopping, be sure to compare total costs that include fees, office disbursements, taxes, registration fees.
For continuing litigation or advice matters, you should ask for and agree upon an hourly rate or fixed cost.
Buyers and Sellers who are trying to budget should also remember that there are often other expenses to be considered.
You paid a deposit with the offer. This deposit will be deducted from the purchase price as money already paid.
Your down payment is the amount of money you have available from your 'own pocket to put toward the purchase price and cost of buying the place. This usually represents your equity in the property, equity being the difference between the property value and the amount you owe against the property.
You will also need fire/liability insurance for the property.
If the vendor has paid more than his proportionate share of this year’s taxes, he will be entitled to ask you to pay him back for your share when his lawyer prepares the "Statement of Adjustments."
Likewise, a vendor who leaves a full tank of oil, or propane, can charge you for it on closing.
You will have to have the hydro, gas, water and sewer accounts put in your name. If some are prepaid or if you have rented equipment on the property, there may be adjustments which will add to your costs on closing.
Placing a Mortgage
If you are one of the vast majority who have to get a mortgage, you should find out from your bank, mortgage broker or lender, which of the following may be required:
An up-to-date- survey
If there is not a good and recent survey plan showing the buildings and improvements as they are, then you may have to get one or get title insurance. Cost varies but for a 1 acre property budget $800-$1,000.
This is often accepted by lenders as an alternative to a new survey.
Budget $450. The price of title insurance is tied to the purchase price in a way.
Budget $375 - 475 AND GET ONE!! I may be able to arrange a discount. Contact me for a referral.
Broker's fees, Lender's Bonus and CMHC fees all cost money! Who pays how much
Be careful to clearly understand them before you sign a mortgage commitment.
Be sure the mortgage broker explains mortgage default insurance and the cost. This insurance will pay the bank the amount owing on the mortgage if you default on payments. The insurance company will then come after you for repayment. Ultimately, pay the mortgage/property taxes/fire insurance and everyone is happy. If you can pay the mortgage default insurance cost, or part of it, from your own resources that would be far less expensive for you in the long run. Mortgage default insurance cost is a lot, depending on the ratio of the amount of the mortgage to the purchase price. The closer these two numbers are, the greater the ratio and the greater the insurance and the greater the cost. Banks often suggest rolling this cost into the mortgaged amount. That makes it convenient on some levels. On other levels, it means you increase the amount you borrow. If you increase the amount you borrow, you increase the amount you have to repay. If you increase the amount you have to repay, you increase the interest cost and the loan becomes more expensive. If you work out the insurance cost over the life of the mortgage, it results in a lot of interest being paid on that amount. Be sure the broker tells you how much of the money actually borrowed will be advanced to me to use for your purchase. There are often deductions, such as mortgage insurance and applicable PST on the insurance cost. Just because you borrow, say, $180,000 does not mean I will be provided with $180,000 to put toward your purchase.
The silly HST will apply to the sale of real property that was used by the vendor/seller primarily to earn income. That adds and extra 13% to the purchase price. The law determines how the tax will be handled. Inquire, do not assume you know. This is a technical area of the law, one where you could be on the hook for a substantial amount of money if you do not deal with the tax correctly.
Be really careful and do not assume the tax does not apply!! GST applies to ALL real estate transactions UNLESS the transaction meets one of the list of exemptions from the tax. PLEASE fully research the tax applicability to avoid a potentially painful and costly surprise. This is a good reason to consult your lawyerbefore signing your offer and committing yourself to a transaction you won't like. Usually a used house is exempt from the tax, but not always. Usually vacant land is exempt from the tax, but not always. Did you know that selling a house with an outbuilding and some vacant land is regarded as more than one transaction for the purpose of determining GST applicability; the tax may apply to some or all of the transaction!!! Revenue Canada has some good GST information on the federal government website. Surf the links or ask your lawyer, or both!! If you sign your contract without knowing all that is involved in the single largest transaction you will likely make in your lifetime, you do so at your own peril and you will have no one else to blame but yourself.
Residential Real Estate, Farms, Businesses, Vacant land
I am currently revising the costs for real estate purchases, sales and mortgages. There will be an increase to accommodate the rising costs of insurance, title searches, etc. We can all thank those in control of gas prices for that!!! If I am fortunate enough to represent you prior to the fee changes, the existing schedule will apply.
When you are shopping around, and I strongly encourage you to do that, make sure you get the same information so you can compare 'apples to apples', so to speak. Clarify if the price you get includes title insurance, office disbursement, GST, registration costs, etc. I use a block fee that includes all costs but for Land transfer Tax charged by the Ontario Government when the deed is registered.
In the meantime, feel free to contact my office in Stirling. I will be glad to answer your questions and help you learn more about one of your most important lifetime transactions.