Selling a home is often viewed as a simple equation: list the property, accept an offer, pay off the mortgage, and receive the remaining proceeds.
In reality, the financial calculation behind a sale can be much more complicated.
A recent transaction reminded me of an important lesson: a successful sale is not only about finding a buyer and agreeing on a price — it is also about ensuring the seller can successfully complete the closing.
When the Sale Price Is Not Enough
Recently, our team was assisting a buyer with a purchase. The property had already been on the market for some time without selling.
After reviewing the market conditions, we submitted what we believed was a reasonable offer. Negotiations continued through several rounds, and at one point, the seller appeared ready to walk away from the transaction.
Eventually, the seller agreed to the price but requested an additional condition:
The offer would need to be reviewed by the seller’s lawyer.
At first, this seemed unusual. However, we later learned that the lawyer was not simply reviewing the contract terms — they were helping the seller determine whether the sale would actually allow them to complete the closing.
After reviewing the seller’s financial position, the result was unexpected.
After paying off the outstanding mortgage, a Line of Credit, and other financial obligations, the seller would still need to contribute approximately $50,000 of their own funds in order to complete the transaction.
The deal ultimately could not proceed.
Why This Situation Happens More Often Than Buyers Realize
This type of situation is not as uncommon as many people think.
Many homeowners purchased properties during the peak market conditions of 2021 and 2022, when prices were significantly higher and borrowing costs were much lower.
Some buyers entered the market with relatively small down payments, such as 5%, 10%, or 20%.
If the property value has not increased enough since purchase, selling today may create a financial gap after accounting for all transaction costs.
The final proceeds from a sale are affected by several factors, including:
- Outstanding mortgage balance
- Home equity line of credit (HELOC) or other secured debts
- Mortgage discharge penalties
- Real estate commissions and applicable HST
- Legal fees
- Closing adjustments and other transaction costs
A home may appear to have enough value to cover the mortgage, but after all expenses are considered, the remaining equity may be significantly lower than expected.
The Importance of Understanding Your Net Proceeds
Before listing a property, sellers should have a clear understanding of their estimated net proceeds.
At minimum, homeowners should calculate:
1. Current Mortgage and Debt Obligations
Understanding the exact balance of all outstanding loans is essential.
A property may have one registered mortgage on title, but homeowners may also have other financial obligations that need to be addressed before closing.
2. Mortgage Penalties and Discharge Costs
Depending on the mortgage terms, selling before the end of the mortgage term may result in a significant penalty.
This cost should be confirmed with the lender before making a selling decision.
3. Transaction Costs
Selling costs can include:
- Real estate commission
- HST on commission
- Legal fees
- Moving expenses
- Potential repairs or preparation costs
These expenses can meaningfully affect the final amount a seller receives.
4. Realistic Market Value
The expected selling price should be based on current market conditions, not the price the property achieved several years ago or the amount a neighbour received during a different market cycle.
The most important question is:
After selling, will the proceeds be enough to complete the transaction without additional funding?
A Reminder for Both Sellers and Buyers
For sellers, understanding the financial outcome before listing can prevent difficult surprises late in the process.
For buyers and buyer representatives, certain situations may require additional attention.
If a property has been sitting on the market for an extended period, negotiations become unusually difficult, or additional conditions such as lawyer review suddenly appear, it may be worth considering whether there are underlying issues affecting the seller’s ability to complete the transaction.
Of course, buyers cannot know a seller’s complete financial situation. However, identifying potential risks early can help prevent a transaction from failing after significant time and resources have already been invested.
Final Thoughts
Selling a home is not simply about accepting the highest offer.
A successful real estate transaction requires careful planning, realistic expectations, and a clear understanding of the financial obligations involved.
Before making the decision to sell, homeowners should know exactly where they stand:
How much will the sale generate?
How much needs to be paid out?
And will the remaining funds allow the transaction to close successfully?
Because in real estate, completing the transaction is just as important as reaching an agreement.
