Completing a real estate transaction
- 19.09.2007
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What you should know about a real estate closing
The Agreement of Purchase and Sale (the “Agreement”) has been signed by both you and the other party and now you are contemplating your next step. The first thing that you should keep in mind, whether you are a seller or a buyer, is that there are usually conditions in the Agreement that benefit the buyer and allow the buyer to do certain things before the Agreement is “firm”. For instance, there is usually a provision in the Agreement where the purchase of the property is made conditional upon the buyer obtaining satisfactory financing, or conditional upon a home inspection that is satisfactory to the buyer. If the purchase is of a condominium, the buyer will likely make the Agreement conditional upon the buyer’s solicitor reviewing a status certificate which outlines the status of the condominium including its financial stability and liabilities.
If you are purchasing a re-sale home or a condominium, you should note that you will have to pay land transfer tax on the purchase price. The amount of tax can be calculated by clicking on the following link and entering in the purchase price: Ontario Land Transfer Tax Calculator.
In addition, there may be certain adjustments on closing. For instance, if property taxes for 2007 were assessed at $2,000.00 and the seller has pre-paid that amount and the closing date is on June 2, 2006, the seller is entitled to a credit in the amount of $1,167.12. This refund would be added to the balance of the purchase price that must be paid to the seller on the closing date. Examples of other adjustments include common expenses, water billed on a flat rate, and oil (if oil is used to heat the home).
Once the Agreement has been signed, you should notify your lawyer of the closing date and provide him/her with a copy of the Agreement. In addition, if you have not already done so, you should visit financial institutions to obtain approval for mortgage financing. The financial institution will ask you to provide the name of the lawyer and the law firm that will be acting for you on the purchase to enable them to forward the mortgage documents and the mortgage funds to the law firm.
If permitted by the Agreement, the buyer should promptly arrange to have an inspector attend the home to conduct a home inspection.
If it is a condominium that you are purchasing, you or your agent will request a status certificate from the property manager of the condominium. Once the status certificate is ready, it is delivered to the buyer’s lawyer for review. The buyer’s lawyer reviews the status certificate together with the accompanying documents and informs the buyer of any concerns that he or she may have. At that point, it is the buyer’s decision as to whether he or she wishes to proceed with the purchase, based on the items that were revealed by the status certificate.
The approval for financing, the home inspection and the review of the status certificate must be completed within the time specified by the Agreement. A waiver must also be signed at the same time as evidence that the conditions have either been complied with or waived, otherwise the Agreement becomes null and void.
Once you have arranged financing, and if it is a house that you are purchasing, you should consult your insurance broker to arrange home insurance. This will be a requirement for most financial institutions prior to advancing any loan amount. Your insurance broker will require the name and address for service of your chosen financial institution which will appear in the Charge/Mortgage registered on title. If you are purchasing a condominium, it is wise to arrange content insurance, as the condominium building and common areas are insured by the condominium corporation but your personal belongings in your unit are not insured.
