Realtor Team Specializing in South Winnipeg

The Real Cost of Purchasing a Property

Thinking of buying a house? Most buyers already know there are costs associated to purchasing a home (apart from the obvious purchase price) but what are those costs exactly?


In the real estate world, we refer to these costs as “closing costs”. These closing costs account for all of the extra fees, taxes and more that are required at the time of closing to ensure the property transfers ownership. On average, we tell our clients to set aside 2-2.5% of the total purchase price of the home to cover these closing costs. What this means, is that if you are purchasing a home for $350,000.00, with a 20% ($70,000.00) down payment you would need to have $8750.00 aside PLUS your down payment to close on this property. If this comes as a little bit of a shock to you, don’t worry, you aren’t the only one! Good news is, after reading this article you will be an expert in what to expect when it comes time to writing that big, scary cheque on possession day!


Just a tidbit of advice before I get started, mortgage lenders will usually want proof that you have the amount needed for closing prior to approving your mortgage financing, so having a rough idea how much you will need will help you understand how much you can afford.


THE BREAKDOWN:

Lawyer Fees:

This is the most variable cost of all of the closing costs. Lawyer fees well vary depending on which lawyer you use, the amount of labour needed, what documents are required and much, much more. The majority of real estate transactions go pretty smooth once they are with the lawyers (we have already done the majority of the back and forth!) and if this is your case, you should be budgeting for roughly $800-1200 for these costs.

IMPORTANT NOTE: If you are NOT using a real estate agent to write the offer, these costs will be significantly higher.


Title Insurance:

We have spoken about title insurance in the past but here is a quick summary once again. Title Insurance is required by most lawyers and lenders when closing on your property. This insurance has replaced the need for a survey of the property. It covers you for encroachments, easements and building permits that were not disclosed to you prior to you purchasing your home. Buyers MUST do their due diligence to ensure this information was not readily available to them prior to them purchasing the insurance. Title insurance will cost between $250-$400 depending on which provider you use.


Land Transfer Tax

This is the big one. This is a provincial tax that is calculated as a percentage of the purchase price of your home. The calculation is a little complicated as it depends on the price of your home. As the purchase price of the home increases, the percentage paid increases as well.  If you would like to see a more accurate calculator you can go to ratehub.ca and go to Land Transfer Calculator and input your information. In Manitoba there is also a registration fee for $70.


Property Tax

Depending on what time of year you are taking possession, and how the previous owners were paying their taxes, you will have to reimburse the sellers for the amount paid already. If they are part of the TTIP program, you will only be reimbursing them for the portion of the taxes they paid for that MONTH after the property transferred. If they paid their taxes in one lump sum in June, you will need to reimburse them for the portion of the YEAR after the property transferred to you. As you can see, this amount can be substantially different depending on how they paid and when. Therefore my advice to you is be prepared to have to pay as though they made one lump sum and there will be no surprises!


Commission

Normally, the buyer does not pay any commission to their real estate agent. The price of the commission has already been built into the purchase price and is paid by the sellers. There are situations where the sellers are not willing to pay commission, when that happens, there is a fee agreement drawn up between the buyer and agent for an amount or percentage agreed to by both parties. This is very rare but does occasionally happen.


Mortgage Default Insurance

This one is an honorable mention, this is not technically a closing cost but it is something to be aware of when purchasing a home. Mortgage default insurance is associated with any mortgage where the buyer has put down LESS than 20% (also called an insured mortgage). This mandatory insurance is tacked on to your mortgage, thus not an upfront cost.


Other costs:

We have covered the fees that will be required on the day of possession but I just want to touch on a few others that may come up during your move!

-          Moving Truck

-          Boxes

-          Internet/Cable set up

-          Renovations 

-          Locksmith

-          Cleaning companies/supplies

-          Storage Locker (depending on when possession is)

-          Painting


Like I had said at the beginning of this article, this may all seem a little overwhelming and not mention expensive. Being aware of the costs to be expected will hopefully take away some of the surprise and prepare you for the realty for what it cost to buy. 


Buying a home in Winnipeg#AgentAshton


Ashton Augert

Phone: (204) 781-1767
Email: Ashton@JenniferQueen.com

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Helping people purchase homes is my specialty yet there are a few things that always come up when dealing with first time home buyers.  One of these things is buyer’s representation.  I get asked all the time “why should we have a buyer’s agent?’ and it is a good question.  Most of the time there is a Realtor representing the home so why not just use them? I am in the industry so the answer to me is clear but I will try and give you my best reasons why I think you should have your own agent for your home purchase.


1. Individual representation

When you see a house you like, whether that be online, at an open house or driving by a sign there is usually a Realtor representing the sale of that home, the Listing Agent.  What you need to know is that the Listing Agent’s initial duty is to the person or persons selling the home.  If you approach the listing agent and ask them to represent you they now have 2 choices: one is to treat you as a customer; and two is to treat you as a client.  If the agent chooses route one then they are still acting in the best interest of the Vendors selling the home and not actually working in your best interest. They may assist you and do owe you honesty and integrity in their dealings, but at the end of the day their loyalty is to the Vendor.  If they choose option two the problem then arises that the agent is now representing both parties, and how easy is it for them to work in the best interest of one party without harming the other? The answer is it’s not simple.  The agent almost acts as mediator between the two parties to come to a mutual agreement. This is one reason why I would recommend picking your own agent before you take interest in a property.


2. Better purchase price


I am asked all the time:  “won’t I get a better deal on the home if I work with the listing agent?”  The answer is almost always no.  If a home is on the MLS there is already a contract signed with the vendors that agrees to pay a buyer’s agent from the proceeds of the sale.  If you decide to purchase through the listing agent all that means is that they receive both the selling and buying commission of the sale, yet as you can see from point 1 that it does not necessarily mean they are representing both sides in the best way possible.  Your best chance of getting a better deal on a home is to have your own agent who is a skilled negotiator and knows the market.  They can fight for what you want.  There is no cost to buyers for using their own agent.


3. Do I need to sign a contract to buy?

This one is a bit trickier as some provinces will not allow people to purchase a home without having what is called a “buyers contract”.  What these contracts do is tie you to a single agent for a home purchase.  Now you may ask why, and the honest answer is: to protect yourself.  You can meet with and interview any realtors you want and if/when you find someone you like you can choose to sign a contract.  This will contractually obligate the agent to help you find a home.  These contracts are not required but IMO are highly beneficial.  Any agent with a signed buyer’s contract is going to work hard to get you what you want.  If you are just seeing things with multiple agents willy nilly, then it is harder for any of them to take you serious and really get you where you need to be for your purchase.


4. Second pair of eyes

Charting the waters of a home purchase can be a daunting and there are a lot of things to look for.  To most people, a home purchase will be the largest purchase in their lifetime.  Yet, we often make these buying decisions in a matter of hours.   Usually people have 1-2 showings before putting in an offer and maybe have a home inspection after that.  That’s it.  Maybe 4-5 hours for something you are going to live in 24/7.  Choosing a buyer’s agent will help you see things you may not think about.  While you may be looking at the sizes of the rooms, the colours, or the layout I will be looking for the potential problems and things that you may overlook.  You have to remember that you are looking at a home and sometimes that emotion can blind you from the necessary diligence needed when going through a home.  Until it is your home it is a house and I will treat it as such.  I will be brutally honest about the flaws, the potential issues, things that need to be fixed.  In any given month I am touring anywhere from 50-70 houses.  I know what to look for and how to write contracts that keep you covered.


I truly think that every person when buying or selling a home should have their own representation from a licensed Realtor.  The benefits to you for protection, knowledge and experience can only be given in its full potential from your own Realtor.  If you have any questions about anything you read above or want to chat more about how a Buyer’s agent can help you, please reach out, this is my specialty after all!



Buyer Representation Agreements

#AgentLogan


Logan Queen

Tel: (204) 226-1261
Email: Logan@JenniferQueen.com

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