Calculating Net Proceeds of Sale

The amount of money which you will have in your pocket when the sale transaction is completed will be the total sale price for the property, less all debts, liens and charges against the property which must be paid out of the sale proceeds.  The typical items which are paid out of sale proceeds are:

Legal Fees

This office offers the following flat-rate fee for standard residential real estate transactions handled through a real estate agent:

 
Sale of a home:                        $750.00 plus disbursements

 Disbursements

Disbursements are expenses incurred by a lawyer on behalf of a client.  Typical disbursements incurred in the sale of a home include the mortgage discharge fee payable to land titles, title search fees, couriers and other miscellaneous charges which as a total generally range from $120.00 to $230.00.

Real Estate Commission

The Real Estate commission, typically calculated as a percentage of the selling price of a home is paid by the seller's lawyer out of the sale proceeds.

Property Taxes

Property taxes are paid annually and always cover the period from January 1st to December 31st.  However, taxes are due on June 30th in the City of Winnipeg and in rural areas the due date is usually in the fall.

Either the buyer or the seller pays the annual tax bill, and the paying party is reimbursed by way of an "adjustment" to the purchase price. 

If you or your mortgage lender, have paid or will pay the taxes prior to the possession date, then you will be reimbursed by the purchaser.  This is accomplished by way of an adjustment to the purchase price, in which the taxes for the remainder of the year during which the purchaser will have possession of the property are added to the purchase price.

In the end you will pay taxes for only the portion of the year that you had possession of the property.

Additionally, if you have been making mortgage payments which include taxes, your mortgage lender will have set up a tax account.  The balance of this account will be taken into account against the balance owing on your mortgage.  Likewise, if you have been making monthly payments of tax under the City's TIPP program, you will be credited with your account balance.

Mortgage

The balance owing under your mortgage will be paid out of the sale proceeds.  There may be a mortgage penalty unless your mortgage is either at the end of its term, or is an open mortgage.  The amount of the penalty will depend upon the terms of your particular mortgage.

In addition, there will be a discharge fee paid to the lender, the amount of which is approximately $150.00.

In general, you will be responsible for all mortgage payments falling due on or before the possession date.

Loans

Any loans secured against your home by way of a caveat or collateral mortgage must be paid out of the sale proceeds, unless other arrangements are made with your lender.

Additionally, any home renovation loan which you have obtained though a utility company or government agency must be paid from the sale proceeds.

Interest

Until the land titles office completes processing of title documents, typically 2-4 weeks, sale proceeds cannot be released to you.  However, during this period of time between possession and when title documents issue, you will receive interest on the sale proceeds.  The standard offer to purchase provides that if the purchaser is obtaining funds by way of a mortgage, you will receive interest from the purchaser on that amount at the same rate of interest as the purchaser's new mortgage.  It is beneficial to a seller that the purchaser be obtaining funds by way of mortgage, rather than paying all in cash, as the purchaser's mortgage rate will generally exceed the rate of interest you could obtain on investing the sale proceeds during the land titles delay.

If you have a mortgage to be discharged, you owe interest to your lender during the same land titles delay.  This will be paid by your lawyer out of the sale proceeds.  If you have arranged interim financing for the purchase of another home, you will pay interest on that amount to your lender during this same time period.

The net effect of the above will depend upon the mortgage rates being paid by yourself and the purchaser on your individual mortgages, if any.

GST

GST is charged on real estate commission, legal fees, and most disbursements.

Typical Sale Transaction: