Who Pays What? A Guide to Closing Costs – Part 2
Selling a home can be stressful, especially when unexpected costs show up. Our desire is to make the buying and selling process as simple and smooth as possible for you which is why we want to share our Guide to Closing Costs. In part one, we shared common costs buyers endure. This week we’re discussing seller’s costs. If you missed our last blog, you can find it at www.WeSellLeduc.com
Real Property Report (RPR). An RPR is a cost that some sellers incur. With a real estate sale of a detached or semi-attached dwelling, an RPR is often required to ensure that the residence along with any additions comply with city bylaws. If the RPR that originally came with your home is still current (no changes have been made) you likely will not need to purchase a new one. If, however, you’ve added a deck, shed, fence, or any other major improvements, a new RPR and compliance will be recommended, and will cost approximately $800.
Title Insurance. At times a seller may opt to pay for title insurance instead of providing an updated RPR. The cost of title insurance can range from $200-275. Under certain circumstances, such as when minor changes have been done to the property, a buyer may accept title insurance instead of requiring a new RPR which would save you over $500.
Permits. When you build a deck, shed, fence, add plumbing, electrical, develop your basement etc. permits are required. Sometimes sellers do not get permits before the work gets started. When this is not done, permits need to obtained for the sale to assure potential buyers that the property meets city code. Minimum costs for permits start around $65 and can run up to a few hundred dollars. Extra fees can also apply if permits were not completed prior to the work being done.
Legal fees. Real estate lawyers facilitate the legal transaction of the home sale. A lawyer drafts and register important documents, examines any potential issues and protects your best interests. Legal fees for a real estate sale, on the selling side, often ranges between $1000-1200.
Taxes Adjustment. In Alberta property taxes can be paid monthly (highly recommended) or in one lump sum on June 30th. If taxes are paid monthly, closing adjustments are a minimal. If, however you make a one-time payment on June 30th, this means you essentially backpay your taxes for 6mos of the year (Jan 1 – June 30), and prepay your taxes for the remainder of the calendar year (July 1 – Dec 31). If you close the sale of your property between January 1 - June 29, and the taxes were paid in full on June 30th (of the previous year), then any taxes into the new year have not been paid yet. For example, say your closing date is April 1, 2020. You will have 3 full months living in your property without taxes being paid, thus you will be required to pay back these 3mos of taxes at closing time. This would represent one quarter of your annual tax bill.
Real Estate Commissions. When you purchased your home, it is very likely you did not pay any real estate fees. How come? Because real estate fees are most commonly paid by the seller. It is impossible to state what compensation will be paid to the Realtor(s) involved with your sale as there is no set fee. Fees are often a percentage of the value of your property, however, sometimes a flat fee can be seen instead. It’s beneficial to interview more than one Realtor to determine their fee structure while at the same time comparing their services, negotiating skills, and success rates.
We hope our Guide to Closing Costs has been helpful for you. If you’ve considered buying or selling a home, or simply want to know how much your home is worth, give us a call. It is always our highest honour to help clients and friends achieve their real estate goals!
Jason Rustand with RE/MAX Real Estate serves with the highest level of integrity and excellence every time. For more info on this topic or others related to real estate contact LIKE our Jason Rustand Team Facebook page, email firstname.lastname@example.org or visit WeSellLeduc.com.