What does it cost to buy a house?

BY STEPHANIE BARON, REALTOR

Whether you are a first time home buyer or whether you haven’t purchased a home in 10, 20, or 30 years… do you know the costs associated with buying real estate?

The largest amount of money that you need will be your downpayment, which will need to be a minimum of 5% of the purchase price. On top of that, you should have 2-4% set aside for closing costs and any other costs associated with purchasing property, including:

1. Property appraisal fees

2. Home inspection fees

3. Lawyer Fees

4. Land Transfer Tax

5. Property tax adjustment

6. Moving fees

Important note – our services as Realtors are FREE for buyers. We get paid from the seller of the property that you purchase.

What is a home appraisal? Who pays for it?

Lenders will usually require an appraisal of the property to double-check you are paying fair market value before approving the mortgage loan. Appraisers will look at the property’s quality as well as how it fits within the current real estate market.

Appraisals can cost anywhere from $300-$800 and if the lender requires one, it is not optional. The borrower (you) is responsible to cover the cost for the appraisal – however, be sure to ask your lender or mortgage advisor to confirm who will be covering these costs, as some lenders or mortgage brokers will cover this cost for you.

Home Inspection – should I get one? How much do they cost?

Home inspections can be extremely beneficial in knowing exactly what kind of home you are preparing to buy. Hiring an experienced and reputable inspector who has the tools to give you accurate information on the properties condition is critical. This will allow you to really get to know the house, learn how to maintain the property over the years, and help understand how everything functions. It should also give you all of the information needed for your home insurance quote.

A full inspection typically costs around $500 plus GST.

Do I need a lawyer? How much does it cost?

In Manitoba, all real estate transactions must be handled by a lawyer; so yes, you need a lawyer.

Lawyers handle all the closing details of the transaction. From processing title search and registration to working with your mortgage lender, ensuring your insurance is in place, processing land transfer tax, adjusting property tax, collecting and processing your down payment money and closing fees – they manage this process from start to finish.

It is important to hire a lawyer who specialized in real estate law – they will be more efficient when it is something they handle all day, every day and they will protect you if you come across any unforeseen complications. If you don’t have a recommendation for a real estate lawyer, ask your realtor – we will be able to provide you with the tip on the best real estate lawyers in the city.

Legal fees can range from $1000-$3000 – depending on the complexity of the purchase.

What is Land Transfer Tax?

Land Transfer Tax is calculated based on the fair market value on the date of registration of a transfer of title.  This is the largest portion of your closing costs and you should be budgeting 2% of the purchase price to cover this.

Here’s a calculator to help you estimate it: Province of Manitoba | finance - Land Transfer Tax (gov.mb.ca)

Property Taxes – how and when does this get paid?

Property taxes are based on the calendar year - January 1 to December 31. In Winnipeg they are payable by June 30 each year, unless the owner is enrolled under the TIPP program.  The party who has paid the taxes is entitled to compensation by the other party for the number of days that they own the property.

For example, if possession date is April 1, the buyer will be entitled to a credit to cover the seller’s share of taxes from January 1 to March 31. The buyer will then be responsible for payment of the entire calendar year’s taxes.

If the possession date is September 1, and the seller paid the entire calendar year’s taxes on June 30, then the seller will be entitled to a credit to cover the buyer’s share of property taxes from September 1 to December 31. This adjustment is handled by your lawyer prior to possession.

What do movers cost?

This will depend on where you are moving from. If you are moving within the same city and have minimal belongings, this expense could be as easy as gas and beer and pizza for friends and family to help. If you have a significant amount of belongings or are moving from another city or province, this could be more of a significant expense, likely in the range of $800-$1500 for a family to move within the city, and $3000-$5000 for an intra-provincial move. They key thing is to do your research and call around to different moving companies to get quotes.

What other expenses should I keep in mind?

• It might be that you have found the “perfect” house but it needs immediate renovations like a new roof, furnace, or hot water tank. If you have the extra funds set aside, it can be an easier decision to buy that perfect house even though it needs work. If there are significant renovations needed, another option is to add your renovation costs to your mortgage loan – speak to your mortgage advisor to determine if this can work for you.

• When you purchase a house or condo, you must have home insurance in place prior to possession and closing.  Costs vary depending on the type of coverage you purchase, so be sure to shop around before you purchase your policy.

• Ideally, you will also set up a savings account when you move into a new home for home improvements, maintenance

Want to know more?

At The Moore Group, we specialize in representing home buyers. We have lots more information here: https://www.themooregroup.ca/buying-a-home.

If you have any questions or are looking to get the buying process started and want to speak with a Realtor - contact us right away!