Selling a home is a significant financial transaction, and it’s important to understand how much money you will actually receive after all costs are deducted. Many sellers assume they will pocket the full selling price, but various fees and outstanding balances must be settled first. Here’s a detailed breakdown of how to calculate your final amount after selling your property in the Toronto real estate market.
Understanding the Formula
The basic formula to determine your final proceeds is:
Selling Price – Selling Fees (Realtor & Legal) – Mortgage Balance – Other Costs = Final Amount Deposited to You
For example:
- Selling Price: $1,000,000
- Realtor Fees (Including HST): $50,000
- Outstanding Mortgage: $400,000
- Legal Fees & Other Costs: $3,000
- Final Amount to You: $547,000
Let’s break down each component in detail.
1. Selling Price
This is the price your home sells for, based on the final agreed-upon offer with the buyer. In Toronto’s competitive market, this amount can fluctuate based on demand, bidding wars, and overall market conditions.
2. Realtor Fees (Commission & HST)
Real estate commissions are typically a percentage of the selling price, usually 4% to 5% of the home’s value. In Ontario, commissions are also subject to 13% HST.
For example, if you agree to a 5% commission on a $1,000,000 sale:
- Commission: $50,000
- HST on Commission (13%): $6,500
- Total Realtor Fees: $56,500
3. Legal Fees
A real estate lawyer is required to close the sale. Their fees typically range between $1,500 – $3,000, depending on the complexity of the transaction.
4. Mortgage Balance Payoff
If you still have a mortgage on the property, the remaining balance must be paid off at closing. Your lender will provide a final payout statement showing the amount owed, which includes:
- Remaining principal
- Interest accrued up to the closing date
- Possible mortgage discharge fees (if applicable)
If you aren’t porting your mortgage (transferring it to a new home), you may also have to pay a mortgage discharge penalty, which can be a few hundred dollars or more depending on your lender.
5. Prepaid Expenses & Adjustments
Some costs may be refunded to you on a pro-rated basis. These include:
- Property Taxes: If you prepaid property taxes for the year, you’ll receive a credit for the portion after closing.
- Condo Fees (if applicable): If you’ve paid condo maintenance fees beyond the closing date, you’ll get a refund for those extra days.
- Utility Bill Adjustments: If you prepay utilities, adjustments may be made to compensate for any overpayment.
6. Liens & Work Orders
If there are any liens on your property (e.g., unpaid taxes, outstanding contractor bills), your lawyer will pay them off from your proceeds before you receive your final cheque.
Similarly, if there are work orders on the title (e.g., unfinished repairs ordered by the city), you’ll need to either fix them or provide financial compensation to the buyer.
Final Amount Deposited to You
After all deductions, the remaining balance will be deposited into your bank account by your lawyer. This final amount represents your home equity, including your original down payment and any increase in value since you purchased the property.
Other Costs to Consider
While the above expenses are the major deductions, there are other potential costs depending on your situation:
- Home Staging & Marketing Costs (if not covered by your realtor)
- Moving Expenses
- Capital Gains Tax (for non-primary residences)
- Bridge Financing (if buying another home before selling this one)
Conclusion
Understanding what you actually receive after selling your home is crucial for planning your next move. By accounting for all fees, mortgage balances, and potential adjustments, you’ll have a clear picture of your final payout. Always consult with a real estate lawyer and realtor to ensure you’re aware of all costs before listing your home.
Selling in Toronto? Make sure you’re financially prepared so there are no surprises on closing day!
Richard Wang 