Who Pays for What When Buying or Selling a Home?

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Buying or selling a home involves considerably more than negotiating the sale price.

Between deposits, legal fees, land transfer tax, adjustments, inspections, real estate fees & moving expenses, there are several costs that can catch people by surprise if they are not planned for in advance.

So, who actually pays for what in a Burlington real estate transaction?

Here is a practical breakdown.

If You’re Buying a Home in Ontario

The Deposit

The buyer provides the deposit after an offer is accepted, according to the terms of the Agreement of Purchase & Sale.

The deposit is not an additional fee. It forms part of the money you are ultimately paying toward the purchase price of the home.

The Down Payment

The buyer is responsible for the down payment.

Your deposit normally forms part of that amount, with the remaining funds required for closing handled through your lawyer.

Ontario Land Transfer Tax

The buyer pays Ontario Land Transfer Tax when the property changes ownership.

One advantage of purchasing in Burlington rather than Toronto is that Burlington buyers do not pay Toronto's additional municipal land transfer tax. Ontario's provincial tax still applies. Eligible first-time buyers may qualify for an Ontario land transfer tax refund.

Legal Fees & Disbursements

Both sides generally have their own lawyer.

For the buyer, legal expenses can include title searches, registration, disbursements, preparation of mortgage documentation & title insurance.

These costs vary by transaction, so I always recommend obtaining a quote directly from your real estate lawyer rather than relying on a generic online estimate.

Home Inspection

If you choose to have the property inspected, the buyer normally pays for the inspection.

That may be one of the better investments you make during the transaction, particularly with an older Burlington home where renovations, additions or major mechanical systems may have changed over decades.

Appraisal

A lender may require an appraisal before advancing mortgage funds.

Depending on the lender & mortgage product, the appraisal may be paid by the buyer or absorbed by the lender.

Mortgage Default Insurance

If your down payment is below 20%, mortgage default insurance may be required. The premium can generally be added to the mortgage, although there may still be applicable taxes or other costs payable at closing.

Property Tax & Utility Adjustments

This is one buyers sometimes forget.

If the seller has already paid certain property taxes or other applicable expenses beyond the closing date, the buyer may reimburse the seller for their portion through the statement of adjustments prepared by the lawyers.

In other words, you are generally responsible for expenses relating to the home from the day you own it onward.

Home Insurance

The buyer arranges & pays for home insurance.

If there is a mortgage on the property, the lender will generally require proof of adequate insurance before closing.

If You’re Selling a Home in Ontario

Your Real Estate Brokerage Fees

The seller pays the remuneration agreed upon with their brokerage under the listing agreement.

There is no government-mandated real estate commission rate in Ontario. The amount & method of calculating remuneration are established between the client & brokerage.

HST generally applies to taxable real estate brokerage services.

What About the Buyer’s Agent?

This is an area where there is a lot of outdated information online.

A buyer's representation agreement sets out what the buyer has agreed to pay their brokerage. A seller may agree to cover some or all of those brokerage fees as part of the transaction, but that should not simply be assumed.

Ontario's current rules require remuneration arrangements to be clearly outlined in representation agreements.

For buyers & sellers, this is something worth discussing with your REALTOR® before an offer is written or reviewed.

Seller’s Legal Fees

The seller pays their own lawyer to complete the legal side of the sale.

The lawyer will typically handle matters such as transferring title, paying out registered mortgages & distributing the remaining proceeds.

Mortgage Discharge or Prepayment Costs

If you still have a mortgage, there may be costs associated with paying it out early, discharging it from title or transferring it.

These amounts are determined by your lender & mortgage terms, not by the REALTOR®, so I recommend checking with your lender early in the selling process.

This is particularly important if you have a closed mortgage with a substantial prepayment penalty.

Property Tax Adjustments

Sellers are generally responsible for their share of property taxes up to the closing date.

If you have prepaid beyond that date, you may receive a credit on closing. If you owe an amount relating to your period of ownership, it may be adjusted accordingly.

Preparing the Property for Sale

This one depends entirely on the home & your selling strategy.

A seller may choose to invest in:

Repairs & maintenance, painting, landscaping, cleaning, decluttering, staging, storage or moving expenses.

Not every home needs a dramatic makeover before coming to market. In fact, spending money in the wrong places immediately before selling can produce very little return.

The key is determining which improvements will matter to your particular Burlington buyer.

So Who Pays the REALTOR®?

This deserves its own section because it is one of the questions I hear most often.

The answer is: it depends on the representation agreements & terms of the transaction.

Sellers agree in writing to the remuneration payable for their own representation & may also agree to contribute toward the buyer's brokerage fees.

Buyers likewise enter into an agreement setting out the remuneration associated with their representation & what happens if the seller contributes some, all or none of that amount.

That is why it is important to understand your representation agreement rather than relying on the old assumption that “the seller always pays both agents.”

How Much Should a Burlington Buyer Budget for Closing Costs?

There is no single number that works for every transaction.

Land transfer tax alone changes substantially depending on the purchase price, while legal expenses, inspections, lender requirements & adjustments differ from property to property.

CMHC advises buyers to account for closing costs beyond the purchase price & identifies legal fees, land transfer taxes, adjustments, inspections, insurance & other expenses among the costs that may arise. Its general guidance suggests closing costs can represent roughly 1.5% to 4% of the purchase price, although your actual Burlington transaction may differ considerably.

I would much rather help a buyer establish a realistic closing budget before we start looking at homes than have them discover a five-figure expense three days before getting the keys.

The Burlington Difference

Burlington has everything from newer condominiums & townhomes to century properties, mid-century neighbourhoods, rural properties & substantial waterfront homes.

That means the costs you should investigate can vary dramatically.

A condo buyer may need to pay particular attention to the status certificate & condominium finances. Someone buying an older home may prioritize inspections. A rural property may introduce well & septic considerations. A luxury or waterfront property can involve an entirely different level of due diligence.

The purchase price tells you what the property costs. It does not necessarily tell you what the transaction will cost.

And knowing that distinction before you buy or sell can make the entire process considerably smoother.

Thinking of buying or selling in Burlington?

Before you make a move, I’m happy to walk you through the numbers specific to your situation so you understand what to expect before you commit.

Rachelle Bernardi | REALTOR®
RE/MAX Escarpment Realty Inc., Brokerage