Essential Information for Home Sellers in Calgary: Understanding Closing Costs

Selling your home in Calgary and the surrounding areas can be an exciting venture, but be aware of the potential expenses involved. Picture this: you’re at the closing table, anticipating a healthy profit, only to find that thousands of dollars have been deducted from your proceeds due to closing costs. This is a common scenario, and if you're unprepared, it can significantly affect your earnings.

In this article, we’ll dissect the typical costs sellers incur, why these costs exist, and share strategies to help you retain more of your money when selling your home in Calgary.

Defining Closing Costs

Closing costs encompass the final fees you must pay to complete your home's sale. These costs cover everything from real estate agent fees to title transfers and legal expenses. On average, sellers can expect to pay between 6% to 10% of the home’s sale price in closing costs.

Understanding these costs in advance helps with budgeting and avoids any unpleasant surprises when finalizing the sale.

Common Closing Costs for Home Sellers in Calgary

1. Real Estate Agent Fees

 In Canada, real estate commissions are negotiable and typically range from 3% to 7% of a property's sale price, varying by region and specific agreements between sellers and agents.

• Why sellers pay them: Agents manage marketing, buyer negotiations, and the entire transaction process.
• Example: On a $400,000 home, a 6% fee equals $24,000 ($12,000 to each agent).

2. Transfer Taxes and Registration Fees

Transfer taxes and registration fees are required by the province and municipality to legally transfer ownership of your home.

• Cost: This varies but usually ranges from 0.5% to 2% of the sale price.
• Who pays these fees? In Alberta, the seller typically covers these costs, though buyers might share or assume full responsibility based on the agreement.

3. Title Insurance (Owner’s Policy)

Title insurance protects buyers against ownership disputes or legal claims on the property. While buyers generally purchase their own policy, sellers often cover the owner’s title policy cost as part of the sale.

• Requirement: Title insurance isn’t mandatory, but it’s a standard practice in most home sales.
• Cost: About 0.5% to 1% of the home’s sale price.

4. Mortgage Discharge Fees

If you have an existing mortgage, you’ll need to pay to have it discharged.

• What does that involve?
• Paying a legal discharge fee plus any early repayment penalties if you’re breaking your mortgage term.

Cost: Legal discharge fees range from $200 to $400; penalties vary by lender and loan terms and can be several thousand dollars.

5. Prorated Property Taxes

Property taxes are paid annually, and you’ll need to cover the portion of the year you owned the home up to the closing date.

• Calculation: The yearly property tax bill is divided based on the number of days you owned the home that year.
• Example: If property taxes are $6,000 per year and you sell midway through the year, you owe $3,000 in prorated taxes.

6. Homeowners Association (HOA) Fees

 If you own a condo or property with a homeowners association, expect final statements.

• Unpaid dues: Any unpaid condo/HOA fees must be paid before closing.
• Status certificate/Estoppel certificate fees: These can cost $100 to $200 and are typically requested by the buyer.

7. Legal Fees

In some provinces, including Alberta, you may need to hire a real estate lawyer to review and complete the sale.

• Typical cost: $500 to $1,500.
• Services provided:
• Reviewing contracts and closing documents.
• Ensuring the transaction is legally compliant.

Minimizing Your Closing Costs

Closing costs can take a sizable chunk out of your home sale profits, but the good news is that there are ways to cut back on these expenses. Whether through negotiation, strategic choices, or finding cost-effective service providers, you have options to keep more money in your pocket.

1. Sell Without an Agent (FSBO)

For Sale By Owner (FSBO) means no listing agent commission.

However, you’ll still need to:

• Pay the buyer’s agent commission (usually 2% to 2.5%)
• Handle marketing, negotiations, and legal steps yourself
• FSBO is best for experienced sellers or if you already have a buyer.

2. Ask the Buyer to Cover Some Costs

In competitive markets, buyers may agree to cover certain fees instead of negotiating a lower sale price. This isn’t common in Canada but can be considered.

3. Shop Around for Legal and Financial Services

Compare quotes for lawyers, movers, and staging services. Some law firms offer flat-fee packages that can save you hundreds.

Preparing for Closing

As you approach the finish line of your home sale, there are still a few final steps to take before closing day. Proper preparation can help avoid last-minute surprises and ensure everything goes smoothly.

1. Review the Statement of Adjustments Early

Canadian sellers receive a Statement of Adjustments outlining final costs and credits. Review it carefully with your lawyer.

2. Finalize Repairs and Disclosures

Complete any agreed-upon repairs. Make sure all taxes, fees, and outstanding balances are paid.

Conclusion

Selling a home involves more than just finding a buyer. While closing costs can accumulate, understanding and planning for them can help you retain more of your earnings. By knowing what to expect and being prepared, you can successfully navigate the sale of your home in Calgary with confidence.