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Completion Guide for Buyers

The Seller accepted your Offer… What Happens Next?

Once the seller has accepted your offer, it’s time to start the due diligence process and information gathering before you can take possession of your new home. Not only is it important to make sure that you remove all the conditions written in the Contract of Purchase and Sale but you need to be aware of the costs associated with the purchase. To ensure a smooth completion, I work with you throughout the process and make sure everything is kept in order while you look forward to owning your new home!

The deposit amount will be specified in the Contract of Purchase and Sale and the funds will be held in trust until the completion date. The deposit is payable in a number of different ways. The most common forms of deposit include a bank draft or personal cheque.

Since the Seller has accepted your offer, it’s time for you to remove any Subject Clauses (conditions) that were listed in the Contract of Purchase and Sale. Typical Subject Clauses include:

  • Financing
  • Receiving the Title of the Property
  • Arranging a Home Inspection
  • Reviewing (Strata) documentation (if applicable)
  • Reviewing the PDS (Property Disclosure Statement)

It’s a good idea to purchase home insurance or content insurance (for your strata property ie. condo, townhome etc.)  Home insurance can be purchased in advance and can be adjusted and transferred to another property.

On Completion Day, you need to prepare for costs associated with transferring title, legal fees and applicable taxes. This is an important day, as the following take place:

  • The title (ownership) is transferred to your name(s) and officially registered at the Land Titles Office
  • Your lawyer or notary will provide a Statement of Adjustments (This is a detailed breakdown of costs which include the balance owing, property transfer taxes, GST/HST, legal fees and other completion costs.)
  • Your lawyer or notary will pay the seller and complete any necessary documentation

On your behalf, I will prepare the necessary documentation and information that the lawyer requires for completion. Be sure to bring the following items to your appointment with your lawyer or notary:

  • Two pieces of identification, photo ID (driver’s license or passport) and a bank card (credit or debit card)
  • A personal cheque to pay the legal fees for your lawyer or notary.
  • A certified cheque or bank draft to pay for the balance of money owing.

Other costs that you need to be aware of:

Adjustment Costs
Appraisal (if necessary)
Disbursements to the Land Titles Office
Lawyer or Notary Fees
Survey Certificate (if required)
Mortgage Loan Insurance
Goods and Services Tax
Property Transfer Tax
Property Transfer Tax Exemptions

Adjustment Costs
The seller(s) need to be reimbursed for any prepaid costs such as property taxes, service contracts, and utilities. If you purchased a condominium or townhome you must reimburse the seller for prepaid strata fees and there could be a fee for moving in/moving out.  The adjustment date in the contract of purchase and sale determines the date that the costs will be credited to the seller.

Appraisal (if necessary)

Before your lender has given approval for your mortgage, you may be required to get an independent appraisal for your home. An independent appraisal can cost approximately $350.

Disbursements to the Land Titles Office
The fees are approximately $500. Your lawyer or notary will arrange this payment.

Lawyer or Notary Fees
The fees for a notary public will be slightly less than using a lawyer, however, a lawyer can offer further legal advice. Fees generally range from $750 and up.

Survey Certificate (if required)
Your lender may require an up-to-date survey if you have purchased a house, however, it is not required to get a survey if you purchased a townhome or condominium. The survey confirms the lot size, dimensions and any existence of encroachments. If the seller did not provide you with the survey, you will need to hire a company to get one done. The cost generally ranges from $150 to $350 and higher, depending on the size of the property.

Before Possession Day, you will need to contact and arrange service with various utility companies such as hydro, gas, telephone, Internet, and cable. It’s best to contact your service providers in advance to ensure the utilities are connected when you take possession of your home!

It is important to arrange for adequate and appropriate insurance to protect your new home. There are two main types of home insurance for condominiums and detached homes. Condominium policies protect the contents of your home since the strata corporation generally provides insurance for the entire building. Policies for detached homes protect the structure as well as your belongings.

Obtain several quotes prior to purchasing home insurance. A number of factors will affect the cost such as the value of your belongings and whether you choose broad or comprehensive coverage.

Mortgage Loan Insurance
If your mortgage is high ratio (a mortgage loan higher than 80% of the lending value of the property), it’s a requirement that you buy mortgage loan insurance from the Canadian Mortgage and Housing Corporation (CMHC) or a private company such as Genworth Financial.  CMHC charges an application fee as well as a premium based on the size of your down payment. Typically, fees range from 1.00% to 2.75% of the principal amount of your mortgage. The application fee ($75-$235) covers the cost of the incurred by the lender to review the application. For more information on premium rates, please view CHMC or Genworth.

Goods and Services Tax

Goods and Services Tax or GST is payable on newly constructed (and never been occupied) homes. Regardless of whether you intend to live in the home or rent it out, if it’s a brand new home, you must pay this tax..

There was a brief time (July 2010 to March 2013) when Harmonized Sales Tax or HST came into effect but it was voted down and the tax system RETURNED to GST instead.

As of April 1, 2013 the current tax rate (GST) is charged at 5% of the purchase price. The transitional period (additional 2% for a total of 7% tax payable) ended on April 1, 2015.  To clarify the technical facts about this transitional period: if you purchase a new home on or after April 1, 2013 and before April 1, 2015 and the construction was at least 10% completed before April 1, 2013 then you must pay the 2% tax.

The good news is that there is a GST New Housing Rebate for buyers who intend to live in their new home or rent it out. Here are the facts to get the GST New Home Rebate:

The purchase price must be $350,000 or less. There’s a partial rebate for homes priced from$350,000 to $450,000. You’re out of luck if the purchase price is $450,000 or higher.

Example #1 Purchase Price BELOW $350,000:

Purchase Price = $325,000
GST Payable = $16,250 OR 5% * $325,000
GST Rebate = $5,850  OR 36% * $16,250

GST Payable = $10,400 OR $16,250 – $5,850

Example #2 Purchase Price btw $350,000 – $450,000:
Needs to use the following formula:
$6,300 ($450,000 – Purchase Price) / $100.000

Purchase Price = $425,000

$6,300 ($450,000 – $425,000) / $100,000 = $1,575

Gross GST = $21,250
GST Payable = $19,675 OR $21,250 – $1,575

For details regarding the GST and HST payable on NEW HOMES, please click here.

Property Transfer Tax

Property Transfer Tax (PTT) should not be confused with GST or ‘Property Tax’ because it is a one-time tax payable to the Provincial Government when you purchase any type of real estate.

How PTT rates for RESIDENTIAL properties are calculated:
Note: There are 2 ways to calculate the rates!

Here’s Method #1:

1% on the first $200,000
2% greater than $200,000, up to $2,000,000
3% greater than $2,000,000
2% greater than $3,000,000 (effective Feb 21, 2018) **Payable only if the property is classified as residential; if classified as residential & farm (only the residential portion will be taxed)

If the purchase price of your home is $3,350,000, the PTT = $85,500

1% on the first $200,000=$2,000
2% greater than $200,000 up to $2,00,000 =$36,000
3% greater than $2,000,000 = $40,500
2% greater than $3,000,000 = $7,000
Total PTT=$85,500

Method #2:

1% on the first $200,000
2% greater than $200,000 up to $2,000,000
3% greater than $2,000,000 up to $3,000,000
5% greater than $3,000,000 **Payable only if the property is classified as residential; if classified as residential & farm (only the residential portion will be taxed)

If the purchase price of your home is $3,350,000, the PTT = $85,500.

1% on the first $200,000 = $2,000
2% greater than $200,000 up to $36,000
3% greater than $2,000,000 up to $3,000,000 = $30,000
5% greater than $3,000,000 = $17,500
Total PTT=$85,500

The Provincial Government calculates the tax using Method #1… WHY? Obviously the additional tax payable on values over $3,000,000 doesn’t seem that ‘bad’ using this method as the percent payable is 2% vs. 5% (in Method #2). Also, due to the way the percentages are calculated in Method #1, there’s more chance for error. That’s why you see Lawyers and Notaries using Method #2. It’s definitely the easier way to calculate the PTT!

For further details regarding the PTT, click here.

Three important things happen on this day. You receive the keys to your home, and the seller is reimbursed for any prepaid bills such as property tax, service contracts or strata fees and you start to pay for utilities such as hydro, cable, telephone etc.

I will coordinate the key exchange with the seller on your behalf and together we’ll do a final walk through of your new home. Congratulations!!

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