Avoid a $13K Mistake When Buying a Home! | Best Toronto Real Estate Broker Karen Law
Monday Oct 14th, 2019Share
One of the deals I closed earlier this week involved a buyer who fell short $13,000 on closing day! I represented the sellers and everything was smooth on our end. The seller's lawyer called me on closing day to inform me of the buyers coming up $13,000 short: as a result, the closing was delayed for five days while the buyer obtained the money from various friends and relatives. There were penalties that cost just over $2,000 that the buyer had to pay as a result of delaying the closing by five days. Learn from this! Do the math before purchasing a home: know the closing costs involved. If you do not know, ask your real estate agent and hopefully, your agent is more knowledgeable and professional than the agent that represented this buyer (or call me if you are in the Greater Toronto Area). Do not make this mistake of falling short thousands of dollars and paying thousands of dollars in penalties for not closing on a real estate transaction that you are committed to.
If you have any questions about real estate or know someone that wants trusted assistance in buying or selling a property in the Greater Toronto Area, give Karen a call
Toronto Real Estate Broker
Hey guys, it's your Toronto real estate agent here Karen law. One of the deals I closed earlier this week has a learning lesson from it. So I represented the sellers in this deal and everything worked out smoothly on our end. The issue was with the purchasers, the buyers. I get a phone call on (the) closing date at about 3:30 p.m. And that phone call is from my client's lawyer. The seller's lawyer calls me at 3:30 p.m on closing date to inform me that the buyers are $13,000 short of closing. That's right. They need to find $13,000 in order to get the keys to the property. And because they were short of these funds at the last minute, they weren't going to be able to close that day.
So what this told me was that the buyers did not do their due diligence in calculating all of the costs that would be involved in closing a real estate transaction.
So guys, before you start your home search, before you start browsing properties, please sit down and understand all the closing costs that are involved in purchasing a home. Here in the Toronto area, let's say you purchase a $500,000 property, the closing costs are largely the Land Transfer Taxes. And the Land Transfer Taxes are dependent on the purchase price. They're also payable before you get the keys to your new home. So for example on that $500,000 property, there's about $13,000 worth of land transfer taxes and that $13,000 is payable before you get the keys to your new home. The other closing costs that are involved are your legal fees for your lawyer. Also buffer room for any adjustments that the lawyer might bill you for. Adjustments can be like property taxes, utility costs. You'll also want to budget in any moving expenses and you always want to have some extra (funds) 'cause in case there's anything that needs to be fixed in the home that you're moving into.
So these are things to always buffer for so that you're not short of funds like this purchaser was. And on top of that guys, there were penalties involved for this purchaser because they couldn't close on the original closing date. They had to spend the weekend gathering the $13,000 from friends and relatives.
And as a result, they paid over $1,500 worth of penalties. These penalties were the result of legal fees for having the delayed closing. Also, my clients who were the sellers, they already moved into their new house and now they had to pay a bridge loan financing as a result of this error on the buyer's part. So who had to pay for the bridge loan financing? The buyers did. So not only were they about $13,000 short on their end, they incurred penalties of I think just under $2,000 and this was only for an extra, I think it was 4 days, an extra four days of delayed closing. So guys just to avoid the headache, avoid paying thousands of dollars of penalties or fees, or falling short money before you get keys to your new property, do the math and know all the costs that are involved in purchasing a property. Their real estate agent, unfortunately, fell short on advising their clients appropriately as well. There were mortgage brokers, lenders that were involved in the process as well. I'm not sure why the lenders overlooked the $13,000 that they were short on. Also. I'm very surprised that it took the lawyers until the exact day of closing to figure out the shortage of funds. There were a lot of professionals that were involved along the way on that side of the transaction. So if you guys need any assistance in understanding the breakdown of costs in order to purchase a property, give me a call. Myself, our team, we're here to advise you correctly and to guide you so that there are no issues when you purchase a home.