Who Pays for What When Buying a Home?

Buying a piece of property is not a simple transaction, and buyers are often surprised by the number of parties involved, who of course, all need to be paid. 

But how is it determined who pays for what?  What is a seller expense and what is paid by the buyer? 

Inspections and Reports

It is generally up to the buyer to pay for a general home inspection and any other more specialized inspections such a roof, plumbing, or electrical inspection. If there is a well or septic system on the property it is generally up to the buyer to have those systems inspected and and to do a water test.  On a large property the buyer may also want a survey that marks the corners of the lot.  This may or may not be paid by the seller.  The allocation of costs for inspections and reports does not determine who will pay for any repairs that might be necessary as a result of those inspections.  That is negotiated between buyer and seller.

Provincial Requirements 

The seller is responsible for the correct permits in the house and that the mechanical equipment such as the water heater are installed to code.  If there are other minimum safety standards that must be met, the seller is generally responsible for those expenses.

Title Insurance 

Title insurance is designed to protect both the owner and lender from financial loss due to title defects, liens, or other title related issues. The buyer pays for a title insurance policy to protect the lender.

Transfer Taxes and Fees 

In BC there is a transfer tax paid to the Government of BC when a real estate title is transferred.  This is always paid by the buyer.

Commissions 

Commissions paid to real estate brokers are paid by the seller (or actually, the buyer because you're the one paying for that amount!).  Commissions in Kamloops are typically (here in B.C. anyway) it is 7% of the first $100,000 and then 3% (to 3.5%) on the balance if you're using the big brokerages

Other Buyer Expenses 

There are other expenses incurred by the buyer that are associated with his new loan including an appraisal fee, lawyers fee etc.  The buyer will also pay for hazard insurance and pro-rated property taxes.

So for a quick checklist:

Seller’s Generally Pay:

• Real estate commission
• Lawyer fees
• Work/repairs required (after a home inspection to correct any agreed issues)
• Obtain relevant city permits

Buyer’s Generally Pay:

• Lawyer fees
• Property tax proration (from acquisition date)
• Inspection fees (according to contract)
• Fire insurance premium for the first year
• Assumption/change of records fees if the buyer is taking over an existing loan
• Lender’s new loan charges
• Interest on new loan from date of funding to 30 days prior to the first payment
• Other prorations (rents, insurance etc.) if applicable

The bottom line:  Who pays for what is mostly as mentioned above.  Just make sure that a discussion regarding allocation of costs is part of your offer writing process with your agent.

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