Don’t Forget These Costs When Buying a Home
You’ve been dreaming of and saving for your home sweet home for some time – you know how much of a deposit you need and are almost there! Before you get in my car to check out some potential homes, I want to make sure you’ve given some thought to the other costs involved in your purchase. I don’t want any surprises to jeopardize your experience. I’m talking about the upfront expenses, aside from your down payment, you’ll need to also save for in order to finalize your purchase. Let’s break it down…
Your purchase contract will most likely contain conditions and some of those might have a cost attached. A home inspection, for example, can run you $350-$600 for a residential inspection depending on the size of the home. And if you are buying a rural property, you may have to complete water well analysis or septic inspection. When it comes to your mortgage, an appraisal might be needed and who pays for that? Generally, the lender will eat the cost of the appraisal but certain mortgage companies will pass that cost along to the buyer at the time of the appraisal. An appraisal in Calgary is around $300-$400, give or take. Just be aware that certain conditions have costs so budget accordingly.
You’ll most likely owe a portion of things like property taxes, utilities or other bills for the property, which will be refunded to the previous owner of the home. For example, the property taxes are often already paid for the whole year – if you took possession July 1st then you would be responsible for the next 6 months of property taxes and the previous owner would be reimbursed what they already paid. You can figure out the approximate cost yourself by working with the property tax figure on the listing and your possession date. Your lawyer will calculate and manage any adjustments based on your closing date and any payments will be detailed in your statement.
Certain sales require title insurance, which will be set-up by your lawyer, and comes with a cost. Title insurance protects you during the gap period between the closing and the registration of the title at Land Titles just in case there are problems during the filing. Title insurance protects you against some of the most common issues seen like the absence of a Real Property report or problems with building permits that cause a loss – like having to tear down a garage built on a utility right of way without a permit. There are many other reasons you might get title insurance and your lawyer will advise on whether or not it is needed in your particular case and usually costs between $200-$300.
You’ll need to hire a lawyer to represent your interests and complete all the above so its best to have one picked out before writing your offer to purchase. Your lawyer and their team will protect you by doing a title search, getting title insurance if needed, preparing & filing the mortgage paperwork, registering the transfer of property at Land Titles, and making sure the transaction goes through smoothly with no hitches. Legal costs can vary depending on where live and what registrations you have on your title but expect to pay between $1,000-2,500.
In Alberta, agents are required to sign a Buyer Brokerage Agreement with any buyer they are working with. Generally, there is a clause in the contract where we agree to the fee I will be paid as your agent. In most cases, the seller will offer the same amount we have agreed to in our contract but there may be other sellers who are offering less than the agreed fee. This is when we discuss how you would like to proceed – ask the seller to amend the fee to what we have agreed to, pay the difference yourself on closing or move on to the next home to save you the cost. In my practice, I’ve not had a buyer have to pay out of pocket for commission but it is a potential cost for you to consider that I had to mention.
There are other costs to keep in mind when determining the cost of buying like CMHC insurance if you are putting less than 20% down. The cost is usually rolled into your mortgage payment, so pay attention to that section of your mortgage pre-approval to know the exact figure.
There is one cost that you will NOT have to pay as an Albertan. A land transfer tax. Alberta and Saskatchewan are the only two provinces in Canada that do not have a land transfer fee. The amount varies from province to province from 0.5%-2.5% of the purchase price but you can keep that money for some new furniture!
I will help guide you through the entire buying process, including what you might need to pay in advance, so you can focus on what matters to you – finding your dream home!