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Closing costs going way up. Concern?

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TheKingEast

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Closing costs have gone up exponentially over the last few years it seems. My worry is are people rushing in to buy these condos aware that their closing costs will be astronomical? I'm hearing a lot of horror stories about extremely high closing costs that even have lawyers stunned. Even if you have a cap, it appears some builders are doing all they can to push every single cost to the buyer to recoup costs they may have lost during the construction process.

I just fear that a number of buyers are going to be in trouble when these new condos close and that could affect the market.

Am I off on this?

This is one of the biggest reasons why I won't purchase brand new.
 
TheKingEast said:
Closing costs have gone up exponentially over the last few years it seems. My worry is are people rushing in to buy these condos aware that their closing costs will be astronomical? I'm hearing a lot of horror stories about extremely high closing costs that even have lawyers stunned. Even if you have a cap, it appears some builders are doing all they can to push every single cost to the buyer to recoup costs they may have lost during the construction process.

I just fear that a number of buyers are going to be in trouble when these new condos close and that could affect the market.

Am I off on this?

This is one of the biggest reasons why I won't purchase brand new.
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Can't they only go as high as the cap?
 
Youranthony1 said:
Can't they only go as high as the cap?
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You can cap certain things but it appears more and more builders are unwilling to set reasonable caps. If you cap the levies, they'll add costs elsewhere. There are a few that are very good with the costs, but more and more are really going for the jugular.
 
TheKingEast said:
You can cap certain things but it appears more and more builders are unwilling to set reasonable caps. If you cap the levies, they'll add costs elsewhere. There are a few that are very good with the costs, but more and more are really going for the jugular.
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Appreciate the heads up, but can you provide some more details about what you've heard? I know of someone though the grapevine that got dinged with a $18K closing cost bill for a condo in the Success/Pinnacle project (mind you they didn't get anything capped so they do bear some if not all responsibility). Say I cap my levies, how bad can it get. What have you heard? And since you've been vocal about the lack of quality in BJL projects, what developers have been particularly unscrupulous?

I definitely agree buying new is just way too risky outside of a small investment type unit, certainly not something I'd want to live in for long term (7+ years)
 
perhaps this is me being naive, but I have bought new builds (not currently built so still learning) and had my lawyer cap all possible levies. Within the agreement, developers listed prices for many things such as levies, cost to connect unitilities (gas/electric/hydro), depositing installment cheques, admin fee, tarion enrollment fee, and fees of 2 months maintenance and reserve fund. This should all be specified in the agreement without any possible hidden costs. Hopefully I shouldn't expect an outrageous final amount. When you add it all up including the land transfer tax, I forsee it being about $15K which makes that above story of $18K plausible.
 
Southcore said:
Appreciate the heads up, but can you provide some more details about what you've heard? I know of someone though the grapevine that got dinged with a $18K closing cost bill for a condo in the Success/Pinnacle project (mind you they didn't get anything capped so they do bear some if not all responsibility). Say I cap my levies, how bad can it get. What have you heard? And since you've been vocal about the lack of quality in BJL projects, what developers have been particularly unscrupulous?

I definitely agree buying new is just way too risky outside of a small investment type unit, certainly not something I'd want to live in for long term (7+ years)
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Just want to clarify that the only BJL project I have a problem with is TKE. I have no issue with his other ones.

As far as unscrupulous builders. Can only go from my experiences and the experiences of friends and family. Lets just say I'd never purchase from Urbancorp, Lanterra, Streetcar, Concorde. Maybe unscrupulous isn't the right word but they're just not reputable builders IMO. There are a couple others that I can't think of right now.

As far as what to cap. Levies are just a small part of closing costs. The costs depend on many things. If you're a 1st time home buyer, then the land transfer gets waived. If not...you're paying 2 of them (most people know abut that though). I've seen cash back incentives only apply after closing. So while you may get $30K off. You still have to close first.

Here's a decent breakdown of what costs to expect: http://closingcosts.ca/blog/2013/07/30/closing-costs-on-a-condo-in-toronto/

I just hope people know how high closing costs can get. And the costs aren't even just from the builder. Like the Land Transfer is from the government. Then you pay Tarion. There are the "development charges". Hydro energization charges. hydro connection fees. section 37 planning act charges. Water and sewer connection, reserve fund, etc... A lot of little charges that aren't part of the levies. Some builders don't pass on all these costs to the purchaser, but some do. I've tried to cap these things in the past but either the builder wouldn't budge or came down a little bit.

Things have deff. changed. The costs were never this bad. Now they're at least double what they were before.
 
pmilo said:
perhaps this is me being naive, but I have bought new builds (not currently built so still learning) and had my lawyer cap all possible levies. Within the agreement, developers listed prices for many things such as levies, cost to connect unitilities (gas/electric/hydro), depositing installment cheques, admin fee, tarion enrollment fee, and fees of 2 months maintenance and reserve fund. This should all be specified in the agreement without any possible hidden costs. Hopefully I shouldn't expect an outrageous final amount. When you add it all up including the land transfer tax, I forsee it being about $15K which makes that above story of $18K plausible.
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Just wait till you close. I'm willing to bet you're going to pay more than 15K. Who did you buy from?
 
TheKingEast said:
Just wait till you close. I'm willing to bet you're going to pay more than 15K. Who did you buy from?
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Are you including land transfer tax in your 15k number?

I closed in December and on a purchase price of approx $500k my closing costs were:

1) Tarion - 1,039.60
2) Utility connection - 2,000 (capped but original amount was 3,264.75)
3) Form Fee - 169.50
4) Discharge Fee - 226.00
5) LPIC - 73.45
6) Status Certificate - 113.00

Additionally, I had to pay Land Transfer Tax and a share of estimated property tax for 2013.
 
hodgkinsken said:
Are you including land transfer tax in your 15k number?

I closed in December and on a purchase price of approx $500k my closing costs were:

1) Tarion - 1,039.60
2) Utility connection - 2,000 (capped but original amount was 3,264.75)
3) Form Fee - 169.50
4) Discharge Fee - 226.00
5) LPIC - 73.45
6) Status Certificate - 113.00

Additionally, I had to pay Land Transfer Tax and a share of estimated property tax for 2013.
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You didn't have to pay for education levies and development charges? (outside of property tax).

TheKingEast, also regarding the break on land transfer tax, it's not the full amount for first time home buyer. It's 5k only. You still need to pay the rest.
 
TheKingEast said:
Just wait till you close. I'm willing to bet you're going to pay more than 15K. Who did you buy from?
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My 15K evaluation is including land transfer tax of about $7200. I bought both from Great Gulf, and Greenpark. I capped almost anything the developers were willing to cap on.
 
AKS said:
You didn't have to pay for education levies and development charges? (outside of property tax).
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I pulled those charges directly from my closing statement. I had no additional levies or development charges. From what I've read the developer will only charge you those levies if they've increased between when you sign your deal and when they receive the building permits. I could be wrong.
 
pmilo said:
My 15K evaluation is including land transfer tax of about $7200. I bought both from Great Gulf, and Greenpark. I capped almost anything the developers were willing to cap on.
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Those 2 are good builders. My biggest worry is 20-30K to close is becoming a reality now. Wasn't that way before. I was speaking with my lawyer and he told me some builders push every single cost to the buyer whereas some will eat the cost. I don't know the specifics but it's not that far off since I look at some of my purchases along with purchases of friends and there are some big differences. I know some builders will use a cap even if the buyer doesn't ask for one. Whereas others will go balls to the wall if the buyer doesn't ask for one.
 
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