You may feel accomplished when you secure a deal for a residential property in Ontario in today’s hot real estate market. However, that sense of accomplishment can be short lived as shortly thereafter the realities of closing the transaction begin to set in. From arranging a mortgage to arranging a mover, the forthcoming move may feel like an anxiety filled event more than a happy homecoming. While we can’t remove the anxiety of the entire real estate purchase transaction, we’re doing our bit by offering you some tidbits about the costs of a residential purchase transaction. With this knowledge, you’ll be well equipped to interview your lawyer about lawyer costs and find out if he or she is right for you.
What should I expect in terms of legal fees?
Generally speaking, lawyers in Ontario offer flat legal fees for residential real estate transactions in Ontario. However, keep in mind that legal fees do not include disbursements and other expenses that you would have to incur. For a residential purchase transaction, you should budget anywhere from $800.00 to $2000.00 for legal fees alone, which can potentially fluctuate depending upon the location of the property, the value of the purchase, the amount and type of mortgages that you obtain, and more. Upon review of your agreement of purchase and sale, and other related documents, a lawyer should be able to provide you with a comprehensive quote for his or her services.
What is Land Transfer Tax?
Purchasers are generally required to pay land transfer tax upon the closing of a purchase transaction. Land transfer tax is dependent upon the purchase price of the property. Purchasers in the Toronto area should expect to pay an additional land transfer tax which is levied only against properties in the Toronto Area. Your lawyer will provide you with a trust ledger in advance of the closing date, which will inform you of the exact land transfer tax amount due. It is important to note that first-time homebuyers are eligible to receive a land transfer rebate of up to the maximum of $4,000.00.
For most residential properties, the property transfer tax rate is calculated as follows:
- 1% on the first $200,000;
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000;
- 3% on the portion of the fair market value greater than $2,000,000; and
- if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000.
What is Title Insurance?
Purchasers are advised to obtain title insurance upon the purchase of a property. Generally, this is a one-time purchase and is applicable to the life of your ownership of the property. Title insurance protects against the following issues, among others: title fraud, defects, work orders, encroachment issues, and zoning violations. The price of the title insurance will be contingent on various factors including location of the property, value of the property, the nature of the property, and the title insurance provider itself.
Lawyers are required to search title to the property which you are seeking to purchase. To do this, lawyers obtain a “parcel register”, which contains information pertaining to the property title including active and inactive mortgages, active and inactive construction liens, registered owners of the property, and legal description of the property. Generally, speaking title search costs in a residential purchase transaction can cost anywhere from $50.00 to $200.00, depending upon the amount of lots involved, and any specific instruments which the lawyer is required to pull from the “parcel register”.
If you have any further questions about your forthcoming residential purchase transaction and specifically lawyer costs, we would be happy to consult with you over the phone or email. We can be contacted at 1-877-892-7778 or email@example.com. In the alternative, you may also find more about our residential real estate services by clicking here.
By: Karan Gupta
November 11, 2021