What can you expect for closing costs in Alberta when you make a real estate purchase?

When you are buying or selling real estate, there are costs to be paid when the transaction is completed and the title is transferred. 

The goal of this article is to help buyers and sellers to budget properly and avoid unexpected bills. The costs are approximate only as all lawyers, surveyors, lenders and appraisers may charge differently. Their fees may also vary based on the size and nature of the transaction. 

If you are buying or refinancing an existing mortgage, expect the following fees: 

1. Legal Fees: Out of the money the buyer will pay to their lawyer, only a portion of it is the lawyer’s fee. This fee is for executing the title transfer and attending to all the details regarding the purchase. These fees typically range from $1,000 to $1,500, depending on the size and complexity of the transaction.
2. Disbursements: In the course of handling the purchase, the lawyer will incur miscellaneous expenses on behalf of the buyer, for which they will have to be reimbursed. These miscellaneous items are called “disbursements” and may include courier costs, long distance charges, and Land Titles charges (the biggest expense is usually the fee paid to the Land Titles Office to register the title in your name). Total disbursements for buying may range from $100 to $150. 
3. Inspection: One of the best ways to understand about a home’s condition, habitability and safety is to hire a professional home inspector1. A properly trained home inspector will review your house as a system, looking at how one component of the house might affect the operability or lifespan of another. Home inspectors will go through the property and perform a comprehensive visual inspection to assess the condition of the house and all of its systems. They will determine the components that are not performing properly as well as items that are beyond their useful life or are unsafe. They will also identify areas where repairs may be needed or where there may have been problems in the past. Inspections are intended to provide the client with a better understanding of property conditions, as observed at the time of the inspection. For a home inspection of a 1800-2200 sqft home the cost is about $500-$750.
4. Appraisal: The lender may require an appraisal report to ensure that the property is worth what the buyer is paying. Standard single-family residential appraisals typically range from $300 to $400, but appraisals for other types of property and for properties in rural areas can be substantially higher. 
5. Real Property Report (RPR): This is sometimes referred to as a “survey” and is usually required by the lender. Once the RPR has been completed, it will be forwarded to the Town or MD Office, where is will be given a stamp of compliance if it conforms to all requirements in the applicable zoning by-laws. The RPR is a safeguard for lenders, as it will show if any buildings are not entirely on the property. Even if you do not require an RPR for financing, many lawyers will recommend that you get one for your own protection. Usually the RPR is provided by the seller, but if not it will cost the buyer approximately $550, plus $75 – $100 for the compliance stamp. 
6. Title Insurance: Some lenders may ask for title insurance in lieu of an RPR but it is becoming increasingly common for lenders to ask for title insurance in addition to an RPR.  The buyer’s lawyer will look after the purchase of a title insurance policy and it protects lender from errors in discharging the existing mortgage and placing a new charge on title for the new mortgage.  This will cost the buyer about $250-$300.
7. Financing over 80% Loan to Value: In Canada, the Bank Act requires that mortgages of more than 80% of the purchase price be insured. This means that the lender is insured against any loss if the borrower defaults on the loan. The insurer is either Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty or Genworth Financial. For a one-time premium paid when the loan is advanced, they will cover any loss the lender might incur on the mortgage. The premium is paid by the borrower  by adding it to the mortgage. The amount of the premium is a percentage of the loan, based on a sliding scale. Refer to Resources on my website for a full list of Mortgage Default Insurance Premiums.
8. Mortgage Payout Penalty: If the buyer has an existing property and a mortgage which is being paid out, there is often a prepayment penalty. The amount will depend on the terms of the mortgage. 
9. Condominium Documents: If you are selling a condominium you will probably be asked to provide the buyer with condominium documents. Usually the condominium manager will charge a fee for providing these. When selling a condo, you will always be required to provide an Estoppel certificate, which the condo manager will also charge a fee to prepare. 
10. Property Tax Adjustment: Depending on the possession date, the buyer will either reimburse the seller, or vice versa, for a portion of the annual taxes. This adjustment seems to be the most misunderstood, so we’ll explain it with an example. Property taxes for the calendar year are due at the end of June. If the buyer were to take possession on August 1st, they would be responsible for taxes from that date forward; however, the seller will have already paid the taxes up to the end of the year. To compensate the seller for the taxes paid in advance, the lawyers will collect five months worth of taxes from the buyer and credit that amount to the seller. Alternately, if the buyer were to take possession on June 1st, the buyer will receive the annual property tax bill and will be responsible to pay it by the end of June (even though he did not own the property prior to June 1st). To adjust for this, the lawyer will ensure that the buyer is credited with five months worth of taxes and his/her closing costs would be reduced accordingly.