TYPICAL ROLE OF A BUYER IN A REAL ESTATE PURCHASE TRANSACTION
A typical real estate transaction involves multiple parties which may include: the buyer and seller, the real estate agent, mortgage broker, representative of the bank / lender, insurance companies, as well as lawyers on both ends of the deal – one for the seller and another for the buyer. Once you have selected the lawyer to handle the ‘closing’ of your transaction, there are a series of steps that your lawyer will undertake on your behalf in order to complete the transaction. This will involve you and your lawyer to collect information from the above-mentioned parties. Therefore, as a buyer, it is critical that you play an active role in providing information and being accessible to the lawyer to ensure that your closing is completed in a timely fashion.
So what could the lawyer expect of you as the buyer? The information below offers an insight into the sort of things you would likely be involved with:
Provide your lawyers information to:
- Your Realtor: The real estate agent requires details of the lawyer’s office including the name, address, email, phone and fax number in order to send the agreement of purchase and sale to the lawyer’s office.
- Your Bank representative or Mortgage broker: The representative will forward the necessary ‘instructions’ to your lawyer to prepare and review mortgage related documents.
It is important that your lawyer’s information is passed on to the above-mentioned parties as soon as possible to avoid any difficulties or delays or to avoid missing important timelines.
Be in contact with your lawyer:
- It is not uncommon that your phone number and other contact information changes before your final closing date. You must keep this up to date with the lawyer’s office to make yourself accessible for information and / or setting up a meeting. If you provide email as a method of contact, be sure you access it frequently.
- Provide your lawyer’s office details with respect to your intended use of the property. Is it an investment property? Will you be occupying the property? Are you a first time buyer?
Provide any other paperwork to your lawyer:
- If you are buying a condominium, you may have a set amount of time in which your lawyer is to review the status certificate. It is your responsibility to ensure that the lawyer receives a copy of the status certificate and has sufficient time for review. Your realtor may be able to assist in gathering the status certificate and delivering it to your lawyer.
- Your lawyer will review your agreement and also answer any questions you may have regarding the closing process.
Order Fire Insurance:
- Fire insurance is a requirement when purchasing a home (as opposed to a condominium – unless specified). Your lawyer will advise you of the particulars of how to set it up. You will have to speak to an insurance company / representative in order to set it up.
Preparation for meeting with Lawyer:
- It is typical for a potential buyer to actually meet with a lawyer in person for the first time right before closing. Prior to that, you will be in touch with the law office several times by phone to provide or receive information.
- Prior to meeting with your lawyer, you will be required to provide certain information such as: parties who are taking title to the property; the manner in which the parties will take title; name and date of birth details; spousal consent particulars; fire insurance set up; and any other information required to complete your transaction. As a result, keeping continual contact and being accessible is very important.
- Your lawyer’s office will also provide you a draft trust ledger prior to your meeting. Assuming the lawyer has all mortgage instructions on time, he or she will know how much money will be advanced to the trust account prior to closing. The remainder of the ledger will include figures such as legal fees & disbursements, land transfer tax figures as well as adjustments from the seller’s lawyers. The lawyer will also specify the amount you are required to bring in at the meeting (usually by way of a bank draft) along with details of who it is to be made payable to.
- You will also be required to bring with you items such as: 2 pieces of valid and unexpired IDs; Fire Insurance particulars (if not already provided); Bank Draft; and any other necessary documents.
- The meeting will usually take anywhere from 30 minutes to 1 hour – depending on the transaction. Your lawyer will go through all the documents including those required by your lender.
- The meeting is usually held a few days prior to the closing date and will be scheduled in advance.
- This is a great opportunity to ask any further questions.
Pick-up your keys!
- Once registration is complete, the lawyer will contact you to come in to pick up the keys to your new home ! Note that keys will only be released once everything is fully registered.
Although it has been around for over a decade, many clients still wonder what title insurance is and what exactly it covers. A title insurance policy may be purchased for new and existing home owners as well as lenders. Sometimes lenders require that a title insurance policy be obtained prior to releasing the mortgage funds.
The “Title” of a property refers to your legal ownership of it and it could be the case that your property may be subject to claims without you having knowledge of it. The ‘closing’ process of your transaction involves a search of public records to review current and prior ownership of the property as well as previous dealings related to it. These claims may be made by the local municipality, a former owner, and or companies seeking an interest in the property. Historically, lawyers used to provide an opinion on title by conducing thorough and often expensive search procedures. However, with the advent of title insurance, lawyers no longer provide such opinions as their clients are protected by title insurance which they purchase at a lower cost.
Since the buyer has an expectation to receive clear title, your lawyer will require the above issues be taken care of by the seller’s lawyer prior to closing. However, sometimes problems which are not apparent by standard searches or items which would be too expensive to conduct searches for. It is often prudent to purchase title insurance which may cover risks such as:
- existing liens against title;
- irregularities with surveys or public records;
- unregistered easements and right of ways;
- unknown title defects;
- encroachment issues (a structure sitting on a neighbour’s property).
Sometimes a survey is simply not available or may not be up to date and in these situations, it is commonplace to purchase a title insurance policy in order to provide coverage. Another important coverage is for homeowners who suffer losses against title to their property as a result of fraud or forgery.
It is important to note that the policy lasts for the duration of your home ownership and most title insurance companies are willing to extend the policy to those who inherit the property or to recipients of a gift.
Have more questions? Please feel free to contact our office for more information on title insurance and closing a real estate transaction.
Note: The above is general information and is not to be construed as legal advice. Please contact a real estate lawyer for more information.Read More
Sometimes, those who may have trouble qualifying for a mortgage may enter into this type of arrangement with a potential Seller. In a rent to own, the Seller is essentially financing the buyer / tenant’s purchase of the property until you can qualify for the same and buy it.
Often this involves an “option to purchase” under which the buyer is not a buyer in a true sense but only a tenant with an option to buy which he or she may exercise at a future date depending on the contract. This typically involves a deposit to be paid along with a higher than normal rent payment which is structured for a certain time until the option can be exercised. Further, some agreements may be set up so that a portion of the rent payment goes towards the down payment.
It is important to have this agreement structured properly so all parties are aware of their rights and obligations. A buyer has to understand the legal difference between being a tenant and not yet a buyer and the risks he or she faces in relation to both the deposit and the down payment. There are plenty.
It is also important to ensure that a mortgage lender will recognize the “down” payment given to the owner / seller to truly be a “down”. If the bank does not, it may mean that the option to purchase cannot be exercised – thereby leading to a scenario the potential buyer may risk losing their deposit / down payment.
It is important to consult a lawyer to discuss this further
This article is for information purposes only and does not constitute legal advice and does not create any solicitor-client relationship. Please contact your legal representative and accountant.Read More
Once you have decided to retain us to act on your behalf on the sale of your home, we will need you to do the following things immediately in order to ensure a smooth closing:
☐ 1. Fax or e-mail
If you or your real estate representative has not already done so, we will need you to fax or email us a copy of the offer or the agreement of purchase and sale.
Please also email us all of your contact information including all cell phone numbers and all email addresses.
☐ 2. Mortgage pay-out statement
As part of the closing process, it is our job to ensure that we obtain an up to date pay-out statement from your bank or mortgage company so that we may pay-out your mortgage from the sale proceeds and discharge the mortgage from the title of your home, which is currently registered as a lien.
Accordingly, to ensure that we have accurate information such as an account number or a mortgage loan number when we write to your bank for a discharge statement, we will need you to fax or email us a copy of your most recent mortgage statement for references purposes. (If you cannot find one, just provide us with a contact name and phone number of your banker).
☐ 3. Property tax bill
We also need to adjust for your property taxes, especially if you have prepaid your taxes for the year or if you have paid taxes for a time period past the closing date.
Accordingly, please fax us or email your most recent property tax bill.
NOTE: If you are currently on a pre-authorized payment plan with the City whereby they automatically debit your bank account for your tax installments, monthly or otherwise, you will need to cancel this immediately. We will also be sending a notice to the City, but you should request them to stop the automatic debit.
☐ 4. Condo fees
If the property you are selling is a condominium unit, we will also be adjusting for your monthly common expense payment with the buyers.
However, as in the case of property taxes, if you have arranged to pay your maintenance fees on a pre-authorized payment basis, you will need to cancel this immediately. (In case you have given post-dated cheques to the Management Office, you will need to get these cheques back).
☐ 5. Contact utilities
You will need to contact the utility companies, such as hydro, water and gas departments to give them your forwarding address so that they may send you the final bill after the meter reading on the closing date.
☐ 6. Appointment to see us
Our office will be calling you approx. 2-3 weeks before the closing date to set up an appointment for you to come in to our office to review and sign all closing documents.
It is important to note that all those who are currently on the title to the home must come in to sign.
Furthermore, if only one of the spouses is the owner and both spouses reside in this property, then the non-owner spouse must also come in to our office to sign.
Finally, if one or all of the owners are not present to sign these documents and an individual under a Power of Attorney will be attending our office for signing, please provide us with the original copy of this Power of Attorney along with the contact information of the Attorney. For more information on this issue, please contact us.
☐ 7. Meeting before closing
It is typical for us to meet 1-2 days before the actual closing date.
Please remember to bring one (1) set of keys to the property with you to the meeting to leave with us so that we may, in turn, forward it to the buyer’s lawyer on closing.
Also, you will also need to bring two (2) pieces of identification.
☐ 8. Pick up funds
Once we have received the closing funds from the buyer’s lawyer on the closing day, we will electronically message the deed to the property to the other lawyer. It is only when he or she has registered this deed in the buyer’s name can we then consider this transaction as having closed.
And once the deal has closed, we will notify you immediately so that you may attend at our office to pick up the balance of the closing funds, which will be in the form of a certified cheque or a bank draft.
You may provide us with a VOID cheque from a major financial institution so we can directly deposit the funds to you after closing is complete. This usually takes place the day of closing or the morning of the following business day.Read More