Make sure you're prepared for all closing costs

When you buy real estate, to complete the transaction, usually three groups need to get paid: the builder, various governments and the lawyer. It's important to make sure you're prepared for all the closing costs, as each group involves the payment of fairly specific items and the builder and your lawyer will collect for government remittance from you.Generally speaking, your lawyer collects all of the necessary money from your mortgage company and from you. You will need certified cheques, bank drafts or cash, because of his trust account requirements.First, I will deal with the builder, and show where all the money your lawyer wants, needs to go.The builder will get paid the purchase price of the property, less the deposit, plus certain other things. You may even get a credit in places. These other items are called adjustments. The adjustments will be reflected on a document called the Statement of Adjustments. This will contain a multitude of different items, all being related to your original agreement. The Statement of Adjustments will include the HST payable (the rebate will be broken out), the original purchase price, real estate taxes, hydro expense, common expenses and maintenance fees (as applicable), connection costs, levies and charges, to name but a few. This document is incredibly important. You need to review it slowly and carefully and get everything explained so you understand all the charges that are being paid. It is at this point that you find out the final number you are paying to the builder for your new home.The provincial government and in Toronto, the City of Toronto, will get paid for Land Transfer Tax, unless you are entitled to the rebate or exemption, and sales tax on goods if applicable. There are many other items, but they usually show up on your lawyer’s disbursement account or trust reconciliation, as do the many of the Municipal compliance request charges.What about your lawyer? First of all, you are going to pay the fee, whatever the amount the two of you agreed to. You did, of course have a pre-agreed fee, didn’t you? Then there is a list of disbursements. Disbursements are those monies expended by your lawyer on your behalf necessary to properly search and close the transaction. Be careful, it is here that someone may try to take advantage by charging large fax, mail and photocopy fees. Make your lawyer justify all expenditures that don’t make sense. Disbursements include registration charges, title insurance, couriers, searches of all kinds of other items necessary to be able to close your transaction.This is just an overview of what you can look forward to. But remember, a large part of this is based on what you negotiate at the beginning and is in your Agreement of Purchase and Sale. Please remember – only a lawyer can provide legal service