Monday, October 29, 2012

10. Closing Costs and Legal Stuff

So, at this point, you've accepted the offer, you've waived your conditions and its a done deal.

The Lawyer and your Realtor handles Most of the legwork.

There are a few points in which you have to hand over hard earned Moola:

  1. Offer Acceptance - Deposit
  2. Building Inspection
  3. Lawyers Fees & Adjustments
  4. Utility Hookups (Deposits)

1. Deposit
$2000-$6,000  ($10,000 max)

When an offer is accepted, there is a deposit. This surprised me, and nobody told me about this. Generally this deposit is a few grand. Mine was 3,000 bucks. Depending on the value of your house, and how affluent your new neighborhood is. This Deposit can vary from 1,500 to 10,000 bucks. (wide range, I know... but good news! It is considered part of your Down Payment!)

The Deposit is usually required within 24 hours of the offer being accepted. Because it caught me off guard, it caused me a lot of stress - I don't typically have Three big ones sitting around that I can access instantly. In Hamilton, deposits are generally cheaper, but I know in Toronto  they're usually a bit more. Ask your Realtor what you should have on hand.

We dropped off a bank draft to our Realtor, and he ran it over to their realtor who held onto it until closing I believe. If you invoke one of your conditions and walk away from the deal, you get this bank draft back. It's only "cashed" once you take possession.

2. Building Inspections
$350-450 (and higher, for large houses)

These are required by ME. $400ish. Don't even think about skipping this. Don't get your buddy or dad to do it (unless he's VERY qualified and does it for a living) Just TRUST me. Its 400 bucks, and in the grand scheme of things, you won't really notice that expenditure. It saved my bacon, It could save yours. Most Inspectors will take a personal cheque, due at the end of the inspection. There's typically tax on this. You might be able to get a cash discount, but I'd be slightly wary of those offering a cash price.

3. Lawyers fees and adjustments
1,250 - 2,000 + Adjustments (Adjustments  can be 0-$3500, sometimes included in mortgage amount)
So the lawyer does a lot of work, and also seems like very little work. All the paperwork is stupidly complicated and wordy, and when you go to sign all the paperwork (probably a few days before closing) you better bring a hot/cold pack for your hand...  - SO MANY SIGNATURES!

The lawyer will charge you for retarded things like staples, photocopies, Faxes, Mail/postage, paper, etc... On TOP of their hourly/flat rate which you hopefully negotiated before hiring them.  My lawyer was awesome because we did almost everything via scans and e-mails. I'm pretty sure this saved me some money and it definitely did save me time. Try and find a "younger" lawyer as they are generally more tech savvy. Old school ones mean a lot of driving and delivering of documents which is a pain.

The Important things the lawyer does:

  • Makes sure there aren't any Liens (debts) against your house. (Taxes, Municipal utilities, Work orders etc)
  • Makes sure that you're actually getting what you think you're getting. (my property is actually two "lots" so our lawyer made sure we were buying both of them. It also cost us 150 bucks more because they had to get two detailed maps from the city of Hamilton of the plots to ensure things were proper.
  • Handles the money. You give your massive down payment cheque to them. They also deal with your Mortgage company to secure the Draft. They also deliver it to the sellers lawyer. (I think electronically) 
  • Will handle any major issues if there are any.
  • Title Insurance - Basically, if anything goes horribly wrong, title insurance will cover you. This allows the lawyer to spend less time digging up all the dirt on your house, and more time creating paperwork for you to sign ;-). Title insurance basically covers you from any hidden stuff arising from the grave and biting you in the ass. (Heres a government PDF that explains it in more detail)
  • Adjustments - If the current owners have paid the full years taxes, you'll have to pay them back for the unused portion. This also includes things like Hot water tank/furnace/A/C rentals if any.
  • Answering questions about Process (hopefully I've helped with this, because a lawyer is an expensive person to ask questions to!
Adjustment fees can vary greatly, particularly at the beginning of the year if the owners have paid their taxes up front, you'll have to pay them back. The good  news is that the lawyer can usually include this into your mortgage.  That about sums up what the lawyer will ask for!
4. Utilities
$500-$2,000 dollars
2 months (if you can) before you take possession   You should find out what utility companies service the new house. If any are in common with what you are using now, you might be able to save some money on deposits.
You need 2 months because some evil utility companies can require this much notice to cancel an account. If you Cable TV/Internet and are locked in a contract, and they don't service your new area, you'll be in for a heated battle, but will probably have to pay a $200-300 cancellation charge per service ( TV, Internet etc) Sometimes they have a grace policy if you're moving to an area out of their service range. (cross your fingers!)  If you're lucky that they do service your new area, let them know of the closing date so they can kill service to your current residence and move you to your new one.

New Utility Companies
Most utility companies like to have a deposit when dealing with a new customer. This way if you turn out to be a deadbeat, they can cancel your service before you eat through your deposit, keeping them from running in the red. Some will waive or reduce this if you agree to Pre Authorized Billing or direct withdrawal.

My Deposits: 
Horizon (Water and Power) - 370 dollars, collected in 3 payments over first 3 bills. Refunded as credit after 12 months
Reliance (Hot Water Tank) - 35 dollar setup fee
Source Cable (Internet/TV) - 35 dollar setup fee, Zero deposit because I agreed to Pre Authorized payment
Union Gas (Natural gas) - 0 Dollars, No Deposit if you sign up for Equal Payment Plan AND Pre Authorized Payment (otherwise I think $300) 

I didn't have a heck of a lot of closing cost money at hand (my unexpected $3,000 deposit on offer acceptance tied up those funds)  so I opted for the cheapest method of signing up for utilities, although I generally like to pay my bills myself rather than have them take the money directly from my accounts. Alas, because I was caught off guard by earlier costs, it was a necessary evil.

That's it for utilities! 

Now, The only other costs are moving expenses. If you were lucky enough to get a closing date in the middle of the month, you may be able to haggle a local truck rental or moving service down a few bucks to make that easier. End or beginning of the month moves are the busiest time, so make sure to book your truck the second you have finalized the closing date (I.E. accepted offer) I'd budget 200 or more for a 32 foot moving truck (if you have lots of furniture) or if you're moving from your folks place, A 16 footer cube truck/van will do it. If you're still living at home, you might be able to get by with a buddy's pickup truck and a few runs with your own car (for boxes)  When I first moved out, I actually moved a 6 foot Birch Table, 5 chairs and a few boxes in my Mazda3 Sedan! (granted, it took some creative angles, dis-assembly and awkward seat positions... but I did it!)

This post was largely boring, but It was chalked full of information. Hopefully it helps you along!

The next post will be an overall summary (shortened) about the home buying process. If I'm not lazy, I might even have a flowchart of the process. (but we'll see!)

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