OOPS - Don’t Forget Pre-closing Expenses!

Congratulations - buying a home is a rewarding accomplishment. But sometimes in all of the busy excitement, new buyers forget that the actual purchase price is not the only amount of money involved in the equation.                        

Once a Buyer’s offer to purchase is accepted there are a series of costs they are likely to incur before they even get to the point of visiting their lawyer for the closing day transaction settlement meeting. For the most part, these are costs that arise as a direct result of the terms and conditions of the agreement with the seller and/or the mortgage commitment from the lender. 


So here is a brief overview of some of the extra money a buyer will spend prior to moving into their home. 


Deposit: this amount is paid to the seller’s brokerage when the deal is agreed to. It’s essentially a sign of good faith or your genuine intention to buy the home. Legally this money has to change hands ASAP after the deal is accepted by everyone (typically 24 hours) so buyers need to have immediate access to this amount. 


Note the Deposit often gets confused with Down Payment. The Down Payment is how much of a buyer’s own money is put towards the total purchase price once the deal is completed. Regardless of the amounts involved, there is usually no direct correlation between them. 


Home Inspection: buyers who choose to hire a qualified Home Inspector to give them a report on the condition of the home should expect to pay $400-$500* up front for the Inspector’s time and expertise. 


Status Certificate: when buying a strata unit or condominium, buyers should ask their lawyer to review the provincially mandated condo documentation and advise if there are any maintenance cost increases or special assessments expected in the near future. The cost of getting the Certificate for the specific unit being purchased varies by property/management company but is typically in the $150* range. 


Water and Septic Tests: homes that are not on municipal services usually require testing to verify an adequate supply of potable water and the normal operation of the septic system. This is common in EG given the high number of properties served by wells and/or septic systems. York  


Region performs basic water tests free of charge but a licensed Septic Service company will pump out and inspect private systems for $500.* Both of these costs are paid at the time of service. 


Lending Fees: in some instances, the mortgage broker or lender may charge fees to lend money to the buyer. These are normally either a flat fee, a percentage of the borrowed amount, or a combination thereof, and can vary greatly depending on the circumstances. Often lenders require these fees to be paid up front before they agree to the mortgage. 


Appraisal: mortgage lenders may want an independent third-party opinion of the home’s value in order to establish how much they are willing to lend. These costs vary based on the specific details of the property. Again, since EG has a high number of rural properties, the cost of appraisals could be $600* or more, although in-town subdivision homes would normally be a little less. Most times buyers are asked to pay the appraisal company before the report is submitted to the lender. 


Property Insurance: Mortgage lenders require buyers to have home insurance coverage in place before closing in order to protect everyone in the event of damage or disaster. The cost of this insurance varies depending on the property’s value and physical characteristics and policy limits and features. It’s not uncommon for annual premiums to be $2,000 or more but at least most providers typically offer some type of payment plan so buyers don’t have to pay the full amount up front. 


Utility Set Up: Buyers, especially first timers, may be subject to deposits charged by utility companies (hydro, water/sewer, natural gas, etc...) until the buyers demonstrate a pattern of responsible bill-paying. Different companies have different policies surrounding these deposits but typically they are charged on the first bill. After a period of time these companies will usually return the deposit in the form of an invoice credit that can be applied to future invoices. 


While of course the actual purchase price is a much more significant amount, it’s crucial that a buyer recognize the importance of having money available for these items well in advance of their planned moving day. In fact, their ability to live up to their legal obligations in the transaction depends on it. 


Note the amounts listed are a general guide for information purposes only and are based on normal circumstances for a typical home being purchased by a regular buyer in the EG market. Actual costs incurred are based on individual circumstances and should be confirmed in advance.                        

Lee Lander is the Owner & Broker of Record of Lander Realty Inc. and has lived in East Gwillimbury for over 25 years. She’s become the go-to local market expert: nobody knows EG Real Estate like Lee because nobody does as much business in EG as Lee does. Lee@LeeLander.com.