Deposit, Mortgage, Downpayment, Adjustments, Interest--Tracing your Buyer Money Thru the process of buying a home.

Tracing your $$$ as a buyer

When you locate the house you decide to make an offer on, this is what will transpire:

1. If after negotiating an offer is accepted (conditionally or firm), the buyer has 24 hrs to certify a deposit to "hold" the house until closing.
As a benchmark we use 5 percent of the purchase price. In unsteady economies the seller may request more.
Note: if the buyer does not close/make good down the road on bringing the money...the sellers doesn't automatically get the deposit money. It typically would go to court where the seller will sue fore deposit money, plus interest plus damages plus legal fees.
This can also be taken care of outside of court.

The deposit money given at this stage by the buyer sits in an interest bearing account typically with the listing brokerage where it will earn a laughable amount of interest in most cases depending on brokerage.

The deposit money is part of the downpayment--all monies calculated by buyer (outside of land transfer taxes, moving costs, legal fees, adjustments and net of mortgage buyer is taking).

On closing, there may be adjustments. Ex: seller has paid taxes for the month or quarter and buyer owes back some money. These adjustments are taken care of at closing. Also, a buyer may opt for title insurance approx 300-400 dollars as a one time fee.

On the date of closing, the bank will forward the mortgage to the buyers solicitor and the buyer will forward all other monies needed to pay seller.

The buyers solicitor will pay out the sellers solicitor and in return the buyer will earn the keys to their new home.

Commissions are stripped out from purchase price and seller is issued cheque net of all borne expenses.

Hopefully this clarifies when and how your money is spent.

Of course depending on where your downpayment is coming from ie RSPs, there are a few further complexities that you're mortgagor will catch you up to speed on.

Today, it was announced that sales in Toronto in June were off nearly 10 percent from last year. The average price of a detached is approx 435k and that the second half of the year we will see a slowdown. Prices may stabilize if new construction stays soft, reducing supply to mostly the resale market.

Cheers-

Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.Propertiesinthegta.ca Blog:mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com