Closing Costs and Other Expenses

There’s always unexpected expenses in life. Either we forget about certain costs or we just aren’t told about them. Buying or selling a home is no different. Whether you’re buying or selling a home there are many costs that you need to remember. A good rule of thumb is to have 2-3% of the purchase price to cover all your closing costs.

Probably the biggest closing cost that catches clients by surprise, especially out of province buyers, is the Property Transfer Tax.

British Columbia charges this tax whenever real estate changes hands. In B.C., this tax is calculated as a percentage of the purchase price of your property, so the more expensive the property, the larger the amount of tax paid. The property transfer tax is calculated as follows:

• One percent on the first $200,000
• Two percent on the balance of the purchase price from $200,000 up to $2,000,000
• Three percent on the value greater than $2,000,000

So for example a home that costs $800,000 the transfer tax will be $14,000

It is key to know that there are several exemptions to this tax. First time home buyers may be exempt from paying all or part of the property transfer tax up to a fair market value of $500,000. There is a partial exemption for prices up to $525,000. Exemptions are also available on newly-built home purchases up to a purchase price of $750,000. It is important to confirm with your lawyer if you are eligible for an exemption or not though.

Some other costs that you can expect at closing time are:

• Legal fees
• Home inspection
• Appraisal
• Moving expenses
• Updates/Repairs
• Utility hook ups/Cable ect

Do your homework and shop around for some of these closing costs. While most services are comparable you can find deals sometimes. And it’s always best to budget a little high so you don’t find yourself scrambling on closing day!