Transaction Costs Your Buyers Need to Know

Most early buyer conversations are about financials and budget.

What can they afford? How much cash do they need to close?

If you understand the breakdown of closing costs, you can set proper expectations and setup your clients for success.

Here's what buyers actually pay, beyond the Purchase Price:

Closing Adjustments

This isn't necessarily a cost — it's an adjustment on a pro-rated basis. Property taxes can result in a credit to either buyer or seller depending on the time of year. For condos, common expenses are adjusted. For tenanted properties, rent, rent deposits, and interest are adjusted.

This can result in your client sending a little more or a little less to the seller on closing depending on where these fall.

Land Transfer Tax

A tax on transferring property ownership. In Toronto, buyers pay twice — provincial and municipal. First-Time Homebuyers receive a Rebate of up to $4,000 on provincial LTT and $4,475 on Municipal LTT.

Registration Fees

The government charges $85 per document registered on title. All purchases require the registration of the Transfer document. If there's a mortgage, that needs to be registered as well — meaning most buyers pay $170 total ($85 + $85).

Title Insurance

A one-time premium protecting against title defects, fraud, and survey issues for as long as they own the property.

Legal Fees

What the lawyer charges to handle the transaction.

– – –

Example

Purchasing a $700,000 condo in Toronto

– – –

The $128,725.87 is what the buyer sends to their lawyer in order to close.

And remember, they've already paid the $35,000 deposit out of pocket earlier in the process.

Total out-of-pocket cost to the buyer: $163,725.87 (assuming 80% LTV mortgage)

A significant portion of the out-of-pocket cost is the deposit and down payment. For transparency, here are the actual transaction costs:

Total Transaction Costs: $24,168.96

This includes:

• Land Transfer Tax (Provincial + Municipal + Admin Fee): $21,065.89
• Registration Fee: $170.00
• Title Insurance: $448.20
• Legal Fees: $2,484.87

Land Transfer Tax is over 85% of the total transaction cost.

These calculations can get confusing, and of course they change for properties outside of Toronto, or when the buyer is paying cash, or if there are more significant adjustments.

To make it easier, we built our Legal Fee Calculator to actually calculate all of these costs, so you or your clients can have a full picture at the click of a button.

Latest YouTube Video:
The REAL Cost of Buying a Condo in Toronto