Buyer's Information

Closing the Deal

It’s an exciting time. Your offer has been accepted. You can’t wait to move into your new home. But don’t start celebrating yet. There is one final stage involved in purchasing a home -- closing the deal.

Closing is the point at which ownership and usually possession of the property is transferred from the seller to you. It takes place after the parties involved agree that all legal and financial obligations have been met. Your lawyer and your Realtor will do much of the work, but here’s a checklist that will show you what to expect as the process unfolds:

• Make sure a copy of the signed Agreement of Purchase and Sale is sent to your lawyer right away. Your Realtor will usually do this for you. Your lawyer needs to see any conditions that exist, and the date you and the seller have agreed to close. The lawyer will ask you how you (and others involved in the purchase) want to be registered on the title to the property.
• Immediately begin satisfying any of the conditions of the agreement that require your action. These have definite dates attached to them and if you miss one you may have to arrange an extension or possibly risk losing the entire deal. As each condition is met, the Realtor will fill out a waiver form for signatures. Note that most lawyers won’t be doing many of the tasks they need to do for closing until the conditions are waived.
• Upon your direction and after the conditions have been met, your lawyer will begin searching title to the property. This is an exercise of going back through government records to ensure a clear title that is transferable. Electronic registration and title insurance have significantly changed the way titles on properties are transferred.
• If you decide to have the home inspected, your offer should contain a condition that the property passes inspection.
• If no current land survey exists on the property, arrange for one soon. Your lender may require it, and you’ll want it for your own peace of mind, anyway.
• Contact your lending institution to begin the process of finalizing mortgage documents. Ask if your lawyer can draw up the documents; this will usually save money.
• Your lawyer will contact the seller’s lawyer with any questions or issues regarding title and costs.
• Your lawyer will check with local utilities (hydro, gas, water) to ensure there are no outstanding claims and to get final meter readings on the day of closing. You should contact the utilities and telephone and cable companies well in advance to arrange for services in your name.
• Meanwhile, your lawyer is busy making sure that property taxes on your new home are up-to-date, local zoning and building restrictions have been met and there are no liens on personal property, such as appliances, to be sold with your house. You want your lawyer to make sure that what you’ve agreed to buy is what you’ll get -- nothing more or less.
• Well before closing; contact your insurance agent to arrange homeowner’s insurance coverage to become effective on the date of closing. Your agent can give you a “binder” letter, certifying coverage is in place. If you’re moving from your current owned (rather than rented) home to another, your agent will handle the homeowner’s insurance transfer for you.
• Your lawyer will review and verify the draft deed, statement of adjustments and other closing information provided by the seller’s lawyer, and will deal with any problems as they arise.
• A day or two before closing, you’ll meet with your lawyer to go over and sign the closing documents. Bring the certified cheque(s) to cover costs involved. Your lawyer will let you know the amounts in advance.

The big day arrives. You don’t need to be present, usually. The lawyers for both parties exchange documents, keys and cheques and then register the deed and mortgage. Soon thereafter you’ll be given the keys to your new home.

Don't Forget Closing Costs

Despite the low cost of carrying a mortgage these days, you should keep in mind "closing costs” in addition to your down payment for that dream home.

These various charges can add up, and for the most part they are all legally required payments in buying a property. Here is a list of most of your major "closing costs."

• Legal fees: Since a lawyer is an essential part of your home-buying team, the work provided involves fees. Most legal fees include searching the title of the property, arranging a property survey if necessary and handling other disbursements as required.
• Mortgage insurance and application fee: For any high ratio mortgage, which is any mortgage in which 75 or more per cent of the house's purchase price is covered by the mortgage, the lender requires mortgage insurance.
• Mortgage broker's fee: A mortgage broker may charge a fee to set up a mortgage for you. In some cases the fee may be included with the legal fees if your lawyer arranges the mortgage, or included in the lender's fees if you deal directly with a lender such as a bank.
• Property insurance: This insurance covers the replacement value of your home and its contents. Most mortgage lenders will require proof that you have this insurance before processing a mortgage.
• Home Inspection: A professional home inspector knows what to look for and can confirm or add to the information you've gleaned from the Realtor or your inspection. Basic inspections on most houses are usually in the $150 to $300 range.
• Land transfer tax: Anyone buying property in Ontario must pay a land transfer tax. It usually runs between 0.5 to two per cent of the home's purchase price, depending on that price.
• GST: GST is payable to some degree on the purchase price on all new homes, although partial rebates are available on the purchase of most homes. A resale residential home is usually exempt from GST. Various other closing fees, however, do involve payment of GST.
• Extra charges: You may also be required to pay the costs of such things as heating oil in the tank, or other costs incurred by the seller, but included with the house, prior to the closing day.
• Hook-ups: There may be hook-up charges required for appliances and services such as telephone, TV cable, hydro and other utilities.
• Moving costs: Don’t forget the basic costs involved in moving from your old place into your new home, particularly if you use a professional moving company.

A Realtor can explain further details on closing costs. Just remember to add them to your financial plan when saving to buy a home.