What You Need to Know About Closing Costs for Home Sellers in Canada

Understanding Closing Costs When Selling Your Home

Selling a home is exciting, but it comes with expenses that can catch you off guard. Imagine this: you’re at the lawyer’s office, expecting to walk away with a solid profit, only to see thousands of dollars deducted from your proceeds. That’s the reality of closing costs, and if you don’t prepare for them, they can take a big bite out of your earnings.

In this post, we’ll break down the costs Canadian sellers typically pay, why they exist, and how to keep more of your money when selling your home.

What Are Closing Costs?

Closing costs are the final expenses you pay to complete the sale of your home. They cover everything from real estate commissions to legal fees, title transfers, and mortgage discharge costs.

Typically, sellers in Canada pay 4% to 7% of the home’s sale price in closing costs.

Understanding these costs ahead of time can help you budget properly and avoid last-minute surprises.

The Most Common Closing Costs for Home Sellers

1. Real Estate Agent Commissions
Real estate commissions are the biggest expense for most sellers. These fees go to the listing agent and buyer’s agent, who typically split the commission.
How much do commissions cost?
In Canada, real estate commissions are negotiable and typically range from 3% to 7% of a property's sale price, varying by region and specific agreements between sellers and agents.
Example: On a $700,000 home, a 5% commission equals $35,000 ($17,500 to each agent).
Agents handle marketing, buyer negotiations, and the entire transaction process. A great agent can often offset this cost by helping you secure a higher sale price and smoother transaction.

2. Land Transfer Taxes
In Canada, land transfer taxes are usually the buyer’s responsibility, but there are exceptions and regional differences.
How much do land transfer taxes cost?
It varies by province. For example, Ontario’s land transfer tax ranges from 0.5% to 2.5%, and Toronto charges a second municipal tax.
Who pays these taxes?
Typically the buyer—but it’s important to clarify in the agreement of purchase and sale.

3. Legal Fees
In Canada, a real estate lawyer is required to handle the closing process.
What do they do?
Review contracts, prepare legal documents, discharge the mortgage, and transfer title.
Cost: Typically ranges from $800 to $2,000 depending on location and complexity.

4. Mortgage Discharge Fees
If you have an existing mortgage, you’ll need to pay to have it discharged.
What does that involve?
Paying a legal discharge fee plus any early repayment penalties if you’re breaking your mortgage term.
Cost: Legal discharge fees range from $200 to $400; penalties vary by lender and loan terms and can be several thousand dollars.

5. Adjustments for Property Taxes and Utilities
Sellers must pay their share of property taxes, utilities, and condo fees up to the closing date.
How is it calculated?
These costs are prorated. For example, if you sell halfway through the year and property taxes are $4,000, you’d pay $2,000.

6. Condominium or HOA Fees (if applicable)
If you own a condo or property with a homeowners association, expect final statements.
Unpaid dues: Any unpaid condo/HOA fees must be paid before closing.
Status certificate/Estoppel certificate fees: These can cost $100 to $200 and are typically requested by the buyer.

7. Moving Costs and Pre-Closing Repairs
While not technically closing costs, many sellers forget to factor in:

• Cost of movers or trucks

• Storage fees

• Final repairs or staging costs

These can add thousands depending on your situation.

How to Reduce Your Closing Costs

Closing costs can take a sizable chunk out of your home sale profits, but the good news is that there are ways to cut back on these expenses. Whether through negotiation, strategic choices, or finding cost-effective service providers, you have options to keep more money in your pocket.

1. Ask the Buyer to Cover Some Costs
In competitive markets, buyers may agree to cover certain fees instead of negotiating a lower sale price. This isn’t common in Canada but can be considered.

2. Shop Around for Legal and Financial Services
Compare quotes for lawyers, movers, and staging services. Some law firms offer flat-fee packages that can save you hundreds.

Preparing for Closing

As you approach the finish line of your home sale, there are still a few final steps to take before closing day. Proper preparation can help avoid last-minute surprises and ensure everything goes smoothly.

1. Review the Statement of Adjustments Early
Canadian sellers receive a Statement of Adjustments outlining final costs and credits. Review it carefully with your lawyer.

2. Finalize Repairs and Disclosures
Complete any agreed-upon repairs. Make sure all taxes, fees, and outstanding balances are paid.

Final Thoughts

Selling a home is more than just finding a buyer. Closing costs can add up, but by knowing what to expect and planning ahead, you can keep more of your profit.