Articles & Information

Calculating the Balance Due in a Purchase or Sale Transaction

Purchasers and vendors quite appropriately want to know how much money they will be required to produce to complete a transaction (or how much money is left over for them), at as early a point in a transaction as is possible. We are always willing to assist in estimating this amount, but, regrettably, we are usually unable to provide an exact figure until a few days prior to closing. This is because some of the information that we require to make this calculation is controlled and prepared by other parties — like the vendor’s lawyer who prepares the closing statement of adjustments, or the mortgage lender, who advises on the actual amount of mortgage funds to be advanced.

For a sale transaction, here is how we calculate the net equity remaining after all required payments:

Balance Due to Vendor (after closing adjustments for deposit, taxes, fuel, etcetera)
MINUS
Amount Required to Discharge All Mortgages (including interest penalties, interest to the date of closing, discharge and administrative fees of lender)
MINUS
Balance of Real Estate Commission Owing (Net of deposit and plus HST)
MINUS
Other Required Payments (for outstanding realty taxes, fuel, common expenses, liens, executions, equipment leases, etcetera, as applicable)
MINUS
Legal Fees and Disbursements plus HST
EQUALS
Net Equity From Sale (Paid as Vendors direct or applied to Purchase, as applicable)

Generally, the amount required to complete a purchase transaction is the result of a fairly complex calculation that could be stated as follows for most purchase transactions:

Balance Due to Vendor (after closing adjustments for deposit, taxes, fuel, etcetera)
PLUS
Land Transfer Tax, Government Registration Costs, Legal Fees and Disbursements, Title Search and Subsearch Costs, Title Insurance Costs, and applicable HST, etcetera
MINUS
The Net Mortgage Advance on All Mortgages (after all deduction of lender costs, applicable interest adjustment, CHMC premiums and PST/GST/HST on same, CMHC or lender application fees)
MINUS
The Net Equity from Sale Property (calculated as set out above, if applicable)
EQUALS
The Balance Required to Complete the Transaction.

The final balance required in a purchase transaction must be paid by certified cheque or bank draft, payable to Siksay & Fraser, in trust.

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