Potential Costs for Buying a Home
Wednesday Oct 21st, 2020
Home buyers can be caught off guard when they are purchasing a property due to the unexpected fees that arise. A common belief is that the seller pays the fees and buyers arrange for their mortgage, however there are a number of other fees associated with the purchase of a property that are often overlooked until the transaction is underway. Below is a list of extra costs that may need to be budgeted for when looking to purchase a property.
Home inspection – The majority of residential real estate transactions in Alberta involve the use of a Home Inspector. This is usually written into an offer as a Home Inspection Condition and not waived until the buyer’s inspector has completed a full inspection of the property. A home inspection may also be a financing requirement from the lender. Costs for an inspection can range from $500 to $2000 depending on the location and size of the property.
Realtor Fees – The majority of real estate transaction fee have the seller pay both the buying and selling realtor fees. While this is common, there are different situations where the seller does not offer a commission or only partial commission to the buyer’s realtor. This could be a FSBO (For Sale By Owner), discount brokerage or the seller is simply offering a lower commission. Make sure you know before hand what your contract is with your realtor. Most contracts have the buyer paying out if the realtor is unable to negotiate the agreed-on commission. Your real estate agent will know before hand what the offered commission is for each property and should discuss this with you before any offers are made.
Lawyer Costs – All real estate transactions require a lawyer to be involved to complete the legal paperwork. First time homebuyers are not always aware of these fees until they have already entered into a transaction. This can be a big surprise when these fees were not planned for in the buying budget. Depending on the transaction and law firm involved, lawyer fees can range from $500 to $2500.
Title Insurance – Depending on the transaction and lender, title insurance may be required when purchasing a property. This protects the buyer from fraud or mistakes related to the title of the property. Make sure you fully understand what your title insurance covers so there are no surprises later. Title Insurance can cost from $300 to $1000.
Adjustment Costs – Adjustment costs may need to be paid to the previous owner to cover utilities and property taxes that have already been paid. The costs will vary depending on date of purchase and whether taxes were paid.
Property Appraisal – Although not as common, a lender may require the buyer to have the property appraised before approving the mortgage. This is often for unique properties such as rural, farm, or undervalued properties requiring extensive renovations. This can also be required when refinancing or applying for a line of credit. This can range from $500 to $800 for most residential properties.
Property Survey – Most sellers provide an up to date real property report but that is not always the case. Lenders may accept title insurance instead, but you may be required to have the property professionally surveyed at your own costs. The can cost between $500 to $1,500 depending on the property. There may also be extra costs associated if changes are need to meet municipal compliance (i.e. relocating an added garage).
Be sure to discuss these potential added costs with your realtor before making any offers on a potential property.