BUYING OR SELLING REAL ESTATE
THINGS TO CONSIDER WHEN DOING A TRANSACTION
INTRODUCTION: DON’T BE INTIMIDATED!
The decision to buy or sell real estate is one of the most important decisions that you will make in your lifetime. It is important both from the standpoint of the substantial investment it represents, as well as in terms of the long-term satisfaction you will derive from home ownership. The process of buying or selling real estate can appear to be very intimidating. This summary is intended to make the process more understandable, in helping you make the right choices in your real estate purchase. If you are a FIRST-TIME HOME BUYER, there are programs available in Ontario to help you; to access this information, simply CLICK HERE FOR FIRST-TIME HOME BUYERS. If you are purchasing a NEW HOME from a builder who is registered under the Ontario New Home Warranty Program, you can access the information regarding the warranty program by clicking here: www.tarion.com
THE “OFFER” (THE AGREEMENT OF PURCHASE & SALE)
The terms “Offer” and “Agreement of Purchase and Sale” are essentially the same. The Agreement of Purchase and Sale, once signed by both parties, is a legally binding contract, which determines all aspects of the real estate transaction. It should clearly spell out all terms and should not be signed by either party until fully understood. The pre-printed agreement includes a number of critical clauses, which you should familiarize yourself with before signing. One of the important clauses to include relates to the inspection of the property by a qualified professional. A minor expenditure for an inspection report can save you from potentially expensive surprises.
WHEN DO I NEED A LAWYER?
Your real estate agent will normally prepare the agreement of purchase and sale. Although a skilled agent will generally produce a suitable agreement, you should feel free to contact a lawyer prior to signing it, if you have any questions or concerns. To ensure that you, or your agent, have instant access to legal advice regarding an offer, it is our policy to make every effort to be available to provide such advice. This web-site provides a cellular number, as well as an e-mail address, which we invite you to use during non-business hours.
THE INITIAL CONSULTATION
In our initial consultation, we will carefully review the agreement of purchase and sale to make sure that your interests are fully protected. We will then provide you with an estimate of all closing costs, taking into account any adjustments, legal fees, transfer taxes and disbursements. There is no charge for this meeting, nor is there any obligation for you to retain our services.
WHAT IF THE DEAL DIES?
In order to encourage you to take advantage of timely legal advice, and to alleviate concerns that you may have undue legal expenses, we have made it our policy that there will be no charge for preliminary services. This applies where we advise you regarding an offer that is not accepted, or where a conditional offer is accepted, but does not proceed because conditions are not satisfied.
HOW MUCH ARE THE LEGAL FEES?
Our fees are based on the complexity as well as the time expended on a transaction. After reviewing the offer, you will be provided with an estimate showing a projected range of fees. If the transaction proves to be straightforward, our fees will be at, or close to, the lower figure quoted. We will not exceed the upper limit of our estimate, even when the transaction turns out to be complicated and, as such, requires a greater than usual expenditure of time.
WHAT ARE “DISBURSEMENTS”?
Disbursements are expenditures made by your lawyer on your behalf in completing the transaction. You will be required to reimburse your lawyer for these expenditures, which are in addition to his/her legal fees. On a purchase, they usually range between $300.00 and $500.00 and cover such items as tax and zoning certificates, a transaction fee, GST, Sheriff’s certificate, as well as search and registration costs. On a sale, the disbursements are fairly minimal, usually below $200.00.
HOW MUCH IS ONTARIO LAND TRANSFER TAX?
Land transfer tax is payable by the BUYER upon the registration of the deed. The amount of tax due is based on the purchase price. It is calculated as follows:
* 0.5% on the first $55,000.00
* 1.0% from $55,000.00 to $250,000.00 (i.e. – the next $195,000.00)
* 1.5% from $250,000.00 to $400,000.00 (i.e. – the next $150,000.00)
* 2.0% on any amount from $400,000.00 to $2,000,000.00
* 2.5% on any amount over $2,000,000.00
For example, the land transfer tax on a $125,000.00 purchase is $975.00 ($275.00 on the first $55,000.00 and $700.00 on the remaining balance of the purchase price).
WHAT ARE “ADJUSTMENTS”?
The typical offer states that the buyer is required to pay “the balance due on closing, subject to the usual adjustments.” On a typical residential purchase, the only adjustment is for municipal realty and water taxes and for heating (if the house is heated with oil). The realty tax adjustments could favour the buyer or the seller, depending on both the timing of the closing, as well as the status of the payments of the taxes by the seller. If the house is oil-heated, the buyer must pay for a full tank of oil, which is currently in the range of $500.00 to $700.00, depending on oil price fluctuations.
ARE THERE ANY OTHER COSTS?
If a mortgage is being arranged, there may be additional costs, such as administrative and appraisal fees. Also, most lenders will require a location survey. If a current location survey is not available, then the buyer will be required to obtain one. A location survey for a residential lot presently costs in the range of $800.00 to $1,200.00, depending on the size of the property. Title insurance is also available and can reduce costs in some situations, while still satisfying your lender’s requirements. Title insurance costs are in the range of $270.00 (actually less, if one considers the fact that some other disbursements may be lower, as a result of using title insurance). If you are interested in knowing about title insurance, you can access information about this subject. Simply CLICK HERE FOR TITLE INSURANCE INFO.
CONCLUSION: GO FOR IT!
The purchase or sale of a property can be both complex and far-reaching, with the results extending many years and dollars into the future. Our objective is to fully protect you and your investment, by providing thorough and professional legal services at a reasonable cost, while at the same time making the process a positive learning experience and giving you the confidence to make the right choices.
PLANNING YOUR MOVE
There are many details to complete. Our Check-list is a starting point that you may find helpful. Buying a house should be a positive experience. A well-planned move will enhance that positive experience. View our Check-list here.
NOTE: This information is based on Ontario law. It is intended to inform and not to advise and does not create a solicitor/client relationship. The statements above are general in nature. The individual facts in a given case may alter their application or involve other laws not referred to here. Any amounts referred to are subject to change.