Residential Closing Process (Resale)
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So, you have finally found your dream home. The Agreement is signed, and you have sent it to your lawyer, but what’s next?
STEP 1: TITLE SEARCH
Requisitions are Sent:
In the closing process, the first major event that occurs after the agreement has been forwarded to your lawyer is the “Title Search”. This date is also mentioned in your agreement of purchase and sale. The title search date is the deadline for the Purchaser’s lawyer to do all the necessary searches to ensure that the title of the property is clear of anything that could hinder a Purchaser’s right to a full possession of the property and the Purchaser’s right to a clear title to the property. The lawyer reviews a series of title searches and documents to ensure that the Title of the Property is free and clear (as per the terms of the Agreement of Purchase and Sale).
Once the Purchaser’s lawyer has done the tile search, the lawyer will then send a detailed letter to the Seller’s lawyer (known as a Requisitions Letter) listing all the items that are required from the Seller (and/or the Seller’s lawyer before the closing date). For example: If there is a mortgage/charge registered against the property, the Purchaser’s lawyer will require the Sellers to discharge the registered mortgage on or before the Closing Date or require the Seller’s lawyer to provide an Undertaking to discharge the registered mortgage. During this process, the purchaser’s lawyer will also request the Seller’s lawyer to provide the Statement of Adjustments (defined below).
A Response to Requisitions is Received: Depending upon the time between the Title Search due date and the Closing Date, the Seller's lawyer will generally provide a response to the Requisitions 5-7 business days before the closing date. A response earlier than that is unlikely but also not uncommon. This will include a Statement of Adjustments showing the amount due on Closing.
STEP 2: COST & FEE ESTIMATE
Estimation of Costs is Sent to the Purchasers: Once the Purchaser’s lawyer receives the Statement of Adjustments, he/she will provide the Purchaser with a Funds Summary (defined below) showing the amount of bank draft to be provided by the Purchaser to his/her lawyer. If a Statement of Adjustments in not received well in advance, then the Purchaser’s lawyer will most likely attempt to provide an estimated Funds Summary so that the Purchaser can be prepared for the closing well in advance. (I try to provide this document to my clients approximately 5-7 business days prior to the Closing Date).
STEP 3: DOCUMENT SIGNING APPOINTMENT
Appointment to Sign Closing Documents: An appointment for you to sign the closing documents will be booked 2-5 business days in advance of the closing date. The appointment will be generally be conducted in person (or virtually given COVID-19 government regulations and recommendations). You can book an appointment by visiting my personal calendar online at www.meetbrar.as.me .
What to Bring With You at the Document Signing Appointment:
Each Purchaser must bring valid two pieces of government issued identification. At least one of the IDs must a valid photo ID (such as a Driver’s License, Passport, Permanent Resident Card etc.) and the second ID can either be a valid photo or non-photo ID (such as a credit card, Social Insurance Card, Birth Certificate, etc.). Health Card is NOT accepted as an ID.
The Bank Draft payable to your lawyer (in Trust).
If you are getting a Mortgage and you are not purchasing a condominium, then you will have to provide your lawyer with proof of property insurance (fire/hazard insurance). The Insurer will ask for the following information: Name of the Lender and the Address for Service of the Lender. In most cases, the insurance must also have a Guaranteed Replacement Cost Coverage and the Lender must be listed as the additional insured. Your lawyer will provide you with additional information if required. The proof of insurance must be provided to your lawyer at least 2-3 business days before the closing date.
STEP4: CLOSING DATE
Closing Date:
If you are getting a Mortgage, then the Lender will deposit the Mortgage Proceeds into the Purchaser’s lawyer’s Trust Account on the date of Closing. Once the Mortgage Proceeds are received, the funds are then delivered to the Seller’s lawyer.
If you used a Realtor or used the Standard OREA form of Agreement of Purchase and Sale, then on the date of closing, as per the Agreement of Purchase and Sale, the Sellers have up to 6 p.m. to vacate the property. On the date of closing, the keys will be available to pick-up from the Purchaser’s lawyer’s office (or be placed in a lock-box at the property) once the property has been duly registered in the Purchaser’s name(s). Until the registration has been completed, the keys will not be released. For most closings, the estimated time for release of keys is on the closing date between 3 p.m. to 5 p.m.; especially if a Purchaser is getting a Mortgage.
TO DO:
On or 1 day before the Closing Date, you must contact all the Utility departments (Water, Gas, Hydro, Hot Water Tank Rental) to set up your Utility accounts. Utility departments generally do not take directions from lawyers, so you will have to contact them directly to ensure that you have connected utilities on the date of closing. Your lawyer will, however, send a change of ownership notification to the City’s Property Tax Department.
I understand that you as a first time home buyer might be nervous/anxious and are probably feeling lost with the whole closing process. We complete real estate transactions on a daily basis and have set specific protocols to meet deadlines and to help clients meet their deadlines for anything that is required to do on their part. For this reason, we are able to provide clients a seamless experience, and I am positive that we will be able to provide the same experience to you. This blog is based on the general questions my first-time home buyer clients have had. If there is anything additional that you need clarification on, then you can send me an e-mail and I will address the answer the additional concerns as soon as I can. Contact me today for the closing of your purchase transaction.
DEFINITIONS
Funds Summary: A document prepared by the Purchaser’s lawyer showing the list of all additional expenses (such as Land Transfer Tax, Title Insurance, Government Registration Fees, etc.) associated with the closing and the amount of bank draft to be provided to the Purchaser’s lawyer.
Land Transfer Tax: When you buy land or an interest in land (real property) in Ontario, you pay Ontario's land transfer tax to the province when the transaction closes. Land transfer tax is normally based on the amount paid for the land. Click here for more Information. For information on First-Time Home Buyer Rebate on the Land Transfer Tax, click here.
Statement of Adjustments: A document prepared by the Seller’s lawyer which provides the details of the amount payable to the Seller on closing. This document takes into account the Sale Price of the Property less an deposits paid by the Purchasers, and also includes an adjustment for the Sellers’ share of the property taxes for the current taxation year, common expenses (in case of condominiums), and any other adjustments required by the terms of the Agreement of Purchase and Sale.
Title: The legal way to establish ownership.
Title Insurance: Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. Title Insurance is not mandatory in Ontario. The decision of whether or not you should purchase title insurance should be discussed with your lawyer and/or title insurance agent/broker. Click here for more information.
Title Search: Title search means that a lawyer will do all the necessary searches and examine the city records to check a property’s title history. These records may include deeds and many other documents. Title searches are done to ensure that a seller has the legal right to sell their property, and that there are no other obstacles that could get in the way of the buyer taking full possession of the property purchased and a clear title as agreed to in the Agreement of Purchase and Sale. An example of some obstacles that can be found in a title search include mortgage claims, construction liens, notices, notices of assignment of rents, title claims, judgements, and several other outstanding claims registered on the title of the property.