By: Kira Berkeley
There are a lot of moving pieces on a real estate transaction – a lot more than meets the eye. Real estate law clerks and lawyers help you solve the problems you didn’t even know you had! Below we will set out all the typical steps involved in a purchase and sale transaction, to give you a better understanding of the full picture.
Purchase Transaction
On a purchase transaction, once we receive the Agreement of Purchase and sale from your realtor, we proceed to open a purchase file and reach out to you to obtain information pertinent to the purchase. This information includes confirming whether or not your are a first-time home buyer, whether or not you will be obtaining a mortgage to purchase the property, and ensuring you arrange for the appropriate fire/house insurance for the property. We will then proceed to perform a title search on the property, to find out any potential title issues that will need to be resolved prior to closing. We will proceed to write our requisition letter to the vendor’s lawyer, detailing anything that needs to be addressed prior to closing, such as ensuring any existing mortgages are paid off and discharged.
We then continue preparing all the necessary paperwork to complete the transaction, such as corresponding with your mortgage lender to obtain any documents they require to be signed, and the Transfer/Deed.
We also arrange for title insurance on the property, to protect both you (and your lender, if applicable), from title matters that could occur post-closing, such as a fraudulent mortgage being registered on the property. You pay a one-time fee for this policy and it lasts the duration of your ownership of the property.
At this point, the file is ready for you to meet with a lawyer and sign all the closing documents, and ask any questions you may have. Prior to the meeting, we will let you know the breakdown of the funds, setting out the exact amount we will need you to provide to purchase the property in the form of a certified cheque or bank draft. Following the meeting, we ensure we send any required documents to the lender and submit their “Request for Funds” document to obtain mortgage funds on the closing date.
On the day of closing, the lawyers’ offices exchange the required signed documents. If you are getting a mortgage, we correspond with the bank to ensure they release the closing funds to our trust account. We then go to the bank to transfer the closing funds to the vendor’s lawyer, and notify them when this has been done. Once they confirm the funds are in their trust account, they will sign off and “release” the Transfer/Deed, which will allow us to register the deal with the Land Registry Office. As soon as the transfer documents are registered, the transaction is officially closed and we can let you know the keys are available and arrange for you to take possession of them so you can proceed to move in.
Lastly, post-closing steps include writing a reporting letter to you and enclosing copies of the documents you should keep for your records. We also ensure the vendor’s lawyer fulfills any undertakings such as discharging any mortgages or encumbrances on title, and providing us proof of same.
Sale Transaction
Once we open a sale file, we reach out to you to obtain information pertinent to the sale, including obtaining some key documents from you such as your most recent property tax bill and your most recent mortgage/line of credit statement (if applicable). If a mortgage is still registered on title, we contact your lender to request they prepare and send us a payout statement, indicating the amount we will be required to pay out from the sale proceeds in order to discharge the mortgage. We then wait until the purchaser’s lawyer sends their requisition letter, and respond accordingly to ensure we are passing clear title to the property.
We then proceed to prepare the Statement of Adjustments, to ensure each pay will party their respective share of realty taxes and condo fees (if applicable).
Once we’ve received the commission statements and payout statements, we’re then able to prepare a funds summary to calculate exactly how much money you will receive from the sale proceeds, after all debts, commission and legal fees are paid. We then assemble all the relevant documents for you to sign prior to closing, such as the Transfer/Deed and vendor’s closing certificate. At this point, the file is ready for you to meet with a lawyer and sign all the closing documents, and ask any questions you may have. Regarding the keys, we work with your real estate agent to ensure that one copy of the key is left in a lock box on the closing date, and we are given the code for the lockbox. Any additional keys, mailbox information, garage door openers, etc should be left on the kitchen counter.
On the day of closing, the lawyers’ offices exchange the required signed documents. We then wait until the purchasers let us know that the closing funds have been sent to our trust account. Once we confirm we have the funds in trust, we will sign off and “release” the Transfer/Deed, which will allow the purchasers to register the transfer with the Land Registry Office. As soon as the transfer is registered, the transaction is officially closed and we can let the purchasers lawyer know the lockbox code to inform their clients.
Finally, we cut cheques to payout any debts, pay your real estate agents, and most importantly send you the sale proceeds! Lastly, post-closing steps include writing a reporting letter to you and enclosing copies of the documents you should keep for your records. We also fulfill any undertakings such as ensuring the lender discharges the mortgage registered on title, and provides us proof of same.
Conclusion
The above descriptions of a purchase and sale transaction are of a simple real estate deal, with no hiccups. Lawyers are also there when something goes wrong – such as a major issue with the house that you notice during your final walkthrough, a broken appliance that was meant to be “in working order” at the time of closing, or filing title insurance claims if a title matter arises post-closing. Additionally, more steps are involved when clients are both purchasing and selling, such as coordinating bridge financing and paying off the bridge loan post-sale closing. Lawyers can also be engaged earlier in the process, to help you negotiate and/or draft the Agreements of Purchase and Sale. Real estate law clerks and lawyers navigate a lot behind the scenes, to help ease the stress of your moving process.