OREA Residential Transactions 2 — Questions and Answers
Question 1: In Ontario, what is the typical deposit amount in a residential transaction?
- There is no standard — it is negotiable, but typically 5% of the purchase price (Correct answer)
- Exactly 20% of the purchase price
- A flat fee of $1,000 regardless of purchase price
- 10% is required by law
Correct answer: There is no standard — it is negotiable, but typically 5% of the purchase price
While there is no legally mandated amount, deposits in Ontario residential transactions are typically around 5% of the purchase price, though this is negotiable. A larger deposit shows stronger commitment and may make an offer more attractive to sellers.
Question 2: What is a 'seller's disclosure statement' in Ontario residential real estate?
- A mandatory government form required for all sales
- A voluntary form (SPIS — Seller Property Information Statement) where the seller provides information about the property's condition and history (Correct answer)
- A financial statement showing the seller's income
- A document disclosing the seller's reason for selling
Correct answer: A voluntary form (SPIS — Seller Property Information Statement) where the seller provides information about the property's condition and history
The SPIS (Seller Property Information Statement) is a voluntary form where sellers disclose information about the property's condition, renovations, environmental issues, and other relevant details. While not mandatory, it can help prevent disputes and protect both parties.
Question 3: In Ontario, what is the significance of the 'closing date' in a residential transaction?
- It is the date the listing expires
- It is the date when ownership is transferred, the purchase price is paid, and the buyer receives possession of the property (Correct answer)
- It is the date the offer was accepted
- It is the date the conditions must be waived
Correct answer: It is the date when ownership is transferred, the purchase price is paid, and the buyer receives possession of the property
The closing date is when the transaction is completed: the transfer is registered, the purchase price (less the deposit) is paid to the seller, the seller's mortgage is discharged, and the buyer receives the keys and takes possession.
Question 4: What is the 'Toronto Municipal Land Transfer Tax' and who pays it?
- An annual tax paid by all Toronto property owners
- An additional land transfer tax imposed by the City of Toronto on the buyer, in addition to the provincial land transfer tax (Correct answer)
- A tax paid by the seller when selling in Toronto
- A federal tax on Toronto properties
Correct answer: An additional land transfer tax imposed by the City of Toronto on the buyer, in addition to the provincial land transfer tax
The City of Toronto imposes its own Municipal Land Transfer Tax on buyers in addition to the Ontario Land Transfer Tax. Toronto is currently the only municipality in Ontario with this additional tax, effectively doubling the land transfer tax for Toronto buyers.
Question 5: In Ontario, what is a 'pre-approval' for a mortgage?
- A binding commitment from a lender to provide a mortgage
- A preliminary assessment by a lender indicating the amount a buyer can likely borrow, subject to property appraisal and final approval (Correct answer)
- A government guarantee of mortgage financing
- A pre-payment of the down payment
Correct answer: A preliminary assessment by a lender indicating the amount a buyer can likely borrow, subject to property appraisal and final approval
A pre-approval is a lender's preliminary assessment of a buyer's creditworthiness and borrowing capacity. It indicates how much the buyer can likely borrow and may lock in an interest rate for a period. However, it is conditional on the lender approving the specific property.
Question 6: What is the purpose of a 'holdback' in an Ontario residential transaction?
- Money held by the real estate agent as commission
- A portion of the purchase price retained by the buyer's lawyer to ensure specific conditions or repairs are completed (Correct answer)
- The seller's down payment on a new property
- Government taxes withheld at closing
Correct answer: A portion of the purchase price retained by the buyer's lawyer to ensure specific conditions or repairs are completed
A holdback is a portion of the purchase price retained by the buyer's lawyer (typically in trust) to ensure certain conditions are met, such as completion of repairs, removal of items, or resolution of title issues. It protects the buyer's interests.
OREA Residential Transactions 2
In Ontario, what is the typical deposit amount in a residential transaction?