February 3rd, 2023 | Buying

The Hidden Costs of Buying and Selling Ottawa Real Estate

If buying or selling real estate is on your mind, you’re also likely crunching some numbers. Like most things in life, the process of buying or selling a home is not as straightforward as it might seem.

With both types of transactions, there are often extra fees and expenses associated that you may not have considered. Although any extra costs are not likely as substantial as the list or purchase price, they do tend to add up and it’s important to go into your next real estate transaction knowing exactly what to expect.

Let’s take a look at some of the hidden costs of buying and selling Ottawa real estate.

Before we go any further, have you subscribed to our newsletter? You can stay in touch with us right here.

Hidden Expenses for Buyers

Land Transfer Tax

The land transfer tax is a fee that must be paid to the province when you take possession of a property. The tax is calculated based on the sale price of the home and is required to be paid by the buyer.

For your reference, below is a link to the Ottawa Real Estate Board’s land transfer tax calculator.

Land Transfer Tax Calculator – Ottawa Real Estate Board (oreb.ca)

However, if you are a first-time buyer, you can receive a rebate on your land transfer tax to help offset the cost.

Deposit Vs. Down Payment

Contrary to what many believe, your deposit and down payment are not the same thing. The down payment is a lump sum that is paid to your lender to help secure your mortgage. A typical down payment for a first-time home buyer is usually anywhere from 5-20% of the purchase price of the home.

The deposit, on the other hand, is a sum that is paid to the seller and held in trust by their real estate agent’s brokerage to secure your offer. In most cases, deposits are usually 2-5% of the purchase price. Once the transaction goes through, your deposit can be transferred to be part of your down payment.

However, it is important to note that in many cases, deposits are required within 24 hours of the acceptance of an offer, so it’s critical to have the funds in hand and not tied up in an account that is difficult to access, such as an RRSP.

Are you looking for more information on buying a home in Ottawa? Read these posts next:

Home Inspection

As a buyer doing your due diligence, a home inspection is always recommended. However, there is a price attached to the service. Depending on the home and the inspector, a home inspection can cost anywhere from $500-$1000. In the grand scheme of things, this is a smaller expense, but still important to factor it into your budget.

Taxes and Insurance

If you have never owned a home before, the idea of paying property taxes might seem foreign, but it’s a necessary part of being a homeowner. When purchasing a home, you may need to pay a pro-rated portion of the annual property tax to the seller upon purchase.

Insurance is also an important expense. You will need to get home insurance, that’s a given. But, did you know that if your mortgage down payment is less than 20%, you will also need to pay for mortgage insurance?

HST on New Builds

If you are purchasing a new construction home or a pre-construction condo, you will need to factor sales tax into your budget. These types of properties are subject to HST. Some builders may include HST in their prices, while others may advertise it as extra. It’s best to ask as many questions as possible before purchasing a new build so you understand exactly which fees will apply on top of the purchase price.

What’s the difference between a pre-construction home and a resale home? Read our blog right here to find out.

Closing Fees

In the province of Ontario you will be required to hire a real estate lawyer to represent you in closing the transaction. Part of the legal fees will include searching title of the property, obtaining title insurance and other disbursements.

Hidden Costs of Selling Your Home

Preparing to sell your home is an exciting time. For most individuals, this is the biggest financial transaction of their lives. While selling your home can often result in a large windfall, there are several expenses you will need to account for.

Preparing Your Home For Sale

Depending on your situation, your home may require some repairs or other work before listing. This could be as simple as painting or staging, or as extensive as a bathroom or kitchen renovation. Depending on the unique strategy for selling your home, current market conditions, and numerous other factors, you may need to invest some money to get a higher sale price.

Your real estate agent can advise you on the things that will make the biggest difference.

Real Estate Agent Fees

Hiring a real estate agent to sell your home is a smart move, as agents have all the tools and resources to help you maximize your sale and make the process as easy and smooth as possible. However, many homeowners may not be aware that real estate fees are subject to HST since this is a service, similar to lawyer fees.

Lawyer Fees

Whenever there is a transfer of land, there needs to be a real estate lawyer involved. Lawyers help prepare transfer of the deed, discharge of any mortgages or liens, and any other necessary paperwork and filings. Working with an experienced real estate lawyer will help you in the long run, as they will ensure you are properly protected.

Mortgage Discharge or Prepayment Penalties

Depending on the terms and conditions of your mortgage, you may be required to pay a fee to discharge your mortgage early or a penalty for repaying the loan early. Be upfront and transparent with your lender in order to avoid any miscommunication or unnecessary fees. Make sure you are completely familiar with your mortgage terms so you know exactly what to expect.

Selling your home can be a big undertaking and a rewarding experience. If you’re thinking about selling your home soon, read these blogs next to learn about what you can expect:

Capital Gains

The sale of your property may be subject to capital gains tax. This is a tax that applies to the profits from selling real estate.

Many homeowners believe that there is a capital gains exemption when selling their primary residence, however, that is not entirely accurate. The capital gains exemption is a calculation that can shield you from a portion of the taxes, depending on your unique circumstances. It’s important to speak with your tax advisor about what you can expect when it comes to capital gains.

Hidden Costs Are Not Meant to Be Overwhelming

Buying or selling real estate in Ottawa–or anywhere for that matter–is a large endeavor. There are many moving parts, to-do lists, and important steps to remember.

Working with a real estate agent, whether you are buying or selling, is the best way to ensure everything goes off without a hitch and you are fully prepared for every situation.

If buying or selling a home in Ottawa is on your mind, we’d love to hear from you. Contact us today at 613.829.7484 or email mail@chellteam.com