Introduction

Over the years we’ve been asked many questions relating to real estate, mortgages and home purchases. This blog post focuses on six of the most frequently asked questions we receive about our client’s home purchase journeys.

Real Estate Processes Change Over Time

There may be many reasons why you are considering your next home purchase.

Perhaps your family is growing, you want to change your neighbourhood environment or home style, or perhaps you want to upsize or downsize your current home.

Regardless of your reason, unless you are purchasing real estate on a frequent basis, you may not be up to date on the recent changes to processes with buying and selling real estate.

Who Is This Blog Post For?

This blog post is written for both those who have purchased a home previously, first time home buyers, or those who are also selling their home.

Purchasing your next home can be as much of an undertaking as buying your first, especially if it’s been a while since you purchased your current home.

We trust that this post will assist you with your next home purchase endeavour.

There will be many acronyms and terminology used during your home buying or home selling process, many of them may have the same meaning, so we’ll try and highlight as many of them as possible.

Our Blog Post Objective

The objective of this post is to provide you with insights, suggestions, and recommendations, based upon a collective of actual experiences with our own clients.

We’ve gathered these experiences into the ‘Six Critical Factors to Consider Before Buying Your Next Home’.

Whether you’ve purchased previously, or this is your first time, you may be surprised by the amount of work involved throughout the entire home purchase process.

From the very beginning when you first thought of buying a new home, to the very end, when you finally moved in and began settling into your new home.

Our clients often ask us similar questions, including:

1. Once we have signed the Agreement of Purchase and Sale (APS), what do we have to do next?

2. Why does the mortgage approval and home closing processes take so long and seem so complex? What actions lead to disappointments?

3. Why does the whole home ownership process appear to leave everything until the last two weeks?

4. What can we expect after Closing, what should we expect next?

5. How do I make sure the appliances we agreed upon in the offer are included? And in working order when we move in?

6. When can the deal be cancelled, if we decide not to buy the home after we have signed the legal paperwork? What happens to our deposit?

We’ve included experiences and insights within this post which will try to answer those six questions.

The information in this post may also serve as a reminder or as additional reference material for you if you are already familiar with these questions and experiences.

This post will focus on the real estate home purchase steps that attract the most attention and questions, especially in the last two or three weeks of that home buying journey.

Some of the most common issues we have experienced with our clients when real estate is being purchased:

✓ Home inspection issues

✓ Property Title issues

✓ Seller ownership title issues (seller does not have legal ownership)

✓ Appliance inclusion or appliance condition, and workability issues

✓ Fixture inclusion or fixture condition and workability issues

✓ Fixture removal home damage

✓ Legal survey issues

We’ll provide additional background about these issues throughout this post. We will also be referencing many real estate terms. We’ve highlighted the primary terms, which you may want to re-familiarize yourself with below.

Terms and Key Documents To Know Before You Get Started

Although very rare and unlikely, your agent or broker, may still be entitled to their commission even though the property sale didn’t close.

There is a clause in the listing agreement you should be aware of which entitles the broker, realtor, or agent to claim their commission, in the event an offer to purchase the property is received, at the listing price. Even though it’s rare, talk to your lawyer prior to signing any agreements. We’ve provided two relevant articles in our Sources and Links at the end of this post.

1. The Realtor ‘Buyer Representation Agreement’ and the ‘Listing Agreement’ (if you are selling).

2. Mortgage Lender Pre-Qualification and Pre-Approval process documents, including application, credit check and Commitment Agreement.

3. Agreement of Purchase and Sale.

Buyer Representation Agreement and Listing Agreement

One of the first resources you will need to work with is a real estate agent. Professional real estate agents and realtors want to provide you with the best service that they can and work in your best interests.

In order provide these services, and avoid any misunderstandings, they will want to outline the services they will be providing to you, and what they also expect from you.

Buyer Representation Agreement (BRA)

If you’re buying a home, the outline of services provided will be in the form of a representation agreement called the Buyer Representation Agreement. This contract will define the business relationship with your real estate agent.

This agreement will enable your real estate agent to work on your behalf throughout the home buying process, including home buying selection, negotiating, some level of informal inspection assistance, and the paperwork involved.

Legally, you will need to sign this contract if you want to engage the real estate agent with your home buying process.

Listing Agreement

Essentially, if you’re selling a home, the outline will be in the form a representation agreement called the ‘Listing Agreement’. This document is a formal contract between the home seller and the real estate brokerage who represents the homeowner after this agreement has been signed.

Your realtor can expand on the importance and details of these documents.

Most importantly and depending on if you are selling or buying (or both), if you are uncomfortable with the document(s) or do not understand either of them, do not sign them until you do understand their contents and are comfortable with them.

You can always ask your lawyer for direction prior.

Although this blog post doesn’t cover every real estate and home purchase component and issue, we’ve highlighted other critical components within this document based upon our own client-based experiences.

A few additional terms to be clarified:

• Closing Date, also known as Completion Date, are terms related to when the transaction closes.

If you are purchasing, this is the date on which you get keys and possession of your new home.

This is the date that the homeowner usually takes possession of the home. This is the step when the buyer receives the keys to the home and is legally allowed to move in, usually no later than 6:00 p.m. on closing day. Which allows the sellers and buyers lawyers to settle the last paperwork and process requirements, and the previous owner to vacate the premises.

• If you are selling, this is the date on which funds are delivered to your lawyer and the date by which you have to relinquish possession.

The timing on when you as the seller will receive funds depends on how quickly your lawyer receives funds from the buyer.

If funds are received early to mid-day, it is likely that you will receive funds the same day. However, our experience is that funds are generally not receiving until the afternoon, pushing the actual receipt of funds by the seller to the following business day.

Please continue reading for details related to ‘‘Six Critical Factors to Consider Before Buying Your Next Home’.

Six Critical Factors

to Consider

Before Buying Your Next Home

1. We’ve Signed the Agreement of Purchase and Sale. Now What? 

The Closing Date

Once you have signed the APS, you will soon be in your new home, as outlined by Closing day in the agreement in the APS.

The Seller and Buyer will agree on the Closing Date, on average once the APS has been signed you usually have approximately 30 to 90 days, more or less, to start your preparation to move into your home.

Activities After the APS Has Been Signed

When the Agreement of Purchase and Sale has been signed and all terms and conditions have been satisfied by both parties, the contract is a legally binding agreement. This leaves a period between the APS being signed and the Closing Date.

It is this period of time that you will use to finalize your financing, insurance, moving arrangements, setting up utilities and work with your lawyer to satisfy any other conditions required for closing.

Timing Varies

The amount of time you have prior to closing varies and will be detailed in both the Offer to Purchase and the Agreement of Purchase and Sale.

This duration of time for closing is agreed upon by the Seller and the Buyer, although this period is usually depending on the seller’s needs and is usually disclosed when the property is listed.

Here are the most important tasks you need to do once the APS is signed:

1. The Deposit

Once you have signed the APS, you usually need to get the deposit to the Seller’s real estate agent promptly, usually by the next business day. So, a visit to your bank or financial institution is essential to get the deposit.

2. Financials – Mortgage Lender/Banking

Be Proactive and Be Patient

In most cases you will have limited time to get your financing organized, this allotted time will be outlined and agreed upon in the APS.

As soon as you sign the APS, you need to visit or contact your mortgage lender and provide the details of your offer to purchase, so they can get your funds approval process started.

Mortgage Lenders Can Get Very Busy

Mortgage lenders can be very busy, they may need day(s) to process your mortgage financing.

They may also need to schedule an appraiser to validate the value of the home. Scheduling an appraisal may take some time, if so, the three to five days agreed to in the APS could be exhausted quickly.

Finance Conditions and Clauses

You and your real estate agent most likely requested ‘conditions or clauses’ in the APS, one of them is often a ‘financing condition’ and the other is an ‘inspection’ condition.

Having a finance condition protects you if you cannot get financing and it also ensures your deposit is returned.

You will need to get the mortgage financing in order as soon as possible to have the finance condition waived on the APS. Having the ‘finance condition waived ‘is important, it demonstrates that you have the required funding and that the deal is likely to be successful.

Finance Arrangement Timing

Most sellers will agree to three to five days for the buyer to arrange financing which will usually be specified and detailed in the APS as a ‘finance condition’.

Sellers usually don’t want to go much longer than 5 days, that is a long time to have their home off the market if a buyer’s financing falls through.

3. Inspection

If a home inspection (as per the APS, you probably included a condition/clause for home inspection) hasn’t been completed prior, now is the time to schedule the inspection, which is usually scheduled 2-3 days after the signing of the APS.

You don’t have an inspector? Your real estate agent will probably have a

few inspection references for you.

Complete This Task ASAP

The inspection condition is another task you want to complete as soon as possible.

You will want to have the inspection, get the inspection report, and discuss the findings with your real estate agent.

In addition to the core inspection criteria, ensure that appliances that are included are inspected and are in working order.

Inspection Is Not a Negotiation Tool

Keep in mind that unless the inspection discovers and identifies a severe issue with the home, or other serious issues, like missing or broken appliance(s), the inspection is for identifying future maintenance or updates for buyer and the new homeowner.

The inspection is not usually a negotiation tool, although if the issue discovered is severe, it could be a deal breaker.

Buyer Visits or Walkthroughs

Testing On Closing Day

Be aware that you will usually be allowed a couple of ‘buyer visits’ or ‘walk throughs’, these visits are not inspections or a time to test appliances.

If the appliance works today, there is no guarantee that it will work when you take possession, so leave the Closing Date to test everything in the house.

In addition, if you were to test an appliance, like a washer or a dishwasher and there was a flood or damages (it’s happened) during a walkthrough, you could be liable for damages.

Other Purposes for Inspection

Buyer visits or walkthroughs help you plan for decorating and design, purchasing fixtures, paint colors, fabric choices, fitting your current furniture and buying new, among other planning ideas.

Keep your visit brief, you are usually only provided with about an hour per visit.

4. Waiving of Conditions and Clauses

Once you have secured your mortgage financing and have your inspection issues or other condition actions satisfied, you will want to inform your real estate agent to have your conditions waived.

With the conditions waived, your home purchase can proceed towards closing day.

5. Home Insurance

Now is the time to re-connect with your home insurance provider.

You will need to provide home insurance details and coverage to your lawyer.

Your mortgage lender should have provided you with the details of insurance required. Contacting your home insurance provider well in advance of closing day is highly recommended.

6. Utility Accounts

If you haven’t already, create a checklist of all your utility accounts and provide notice of terminating your current address particulars and if applicable transfer to your new address.

7. Keys and Alarm

You will receive your keys shortly; however, you will want to change the locks on all the doors, change security alarm codes (make sure your lawyer gets them during the transfer).

During your home inspections and walk-throughs, take note of the doors with locks and how many door locks you will require.

8. Mover/Moving

Prepare a project plan and check list of your moving activities.

9. Current Occupants Haven’t Left the Home

Although it’s very rare, prepare a back-up plan in case the previous owners haven’t vacated the home when they were supposed to, it can happen (see in our Sources and Links at the end).

An additional condition or clause in the APS, outlining the clear expectations and an understanding of when the previous owner will be totally vacated from the buyer’s new property may be of interest.

10. Furnace Filter

It may be a good idea to prepare to change the filter when you arrive at your new home. Perhaps get the filter part# in advance, during a walkthrough so you can have a new filter the day you take possession.

2. Be Patient, Mortgages Can Take Some Time 

Many of our clients have asked us why the purchase process takes so long. Especially the mortgage lending process.

We’ve provided some insights that may help you with these questions.

 Also included are a few critical insights that you should be aware of, insights which could not only delay the mortgage process, but could terminate the home purchase altogether.

Once you have decided to start looking for a new home and have been in contact with your real estate agent and your lawyer about your next home purchase plans, there are many processes and steps which are about to be set in motion.

Over the course of your next home purchase journey, you will be contacting, working with, and communicating with many stakeholders, including your:

• Lawyer
• Mortgage lender
• Real Estate agent
• Insurance agent
• Home Inspector
• Others

Being Prepared Is Key

To limit and reduce last minute items which can delay or even terminate the home purchase process altogether, your preparation is crucial with each of these stakeholders.

The work effort of these stakeholders will significantly increase as the Closing Date nears, especially the last two weeks, so as a buyer (or seller) ensuring that you are not a bottleneck or obstacle in these important and time sensitive milestones.

Being Proactive

Be proactive and ensure that they have all the documents, your attention and your response when needed. Ask them how you can ensure the process is flowing smoothly from your end.

Get Started Early

The involvement of key stakeholders as early as possible in the process, including your mortgage lender, lawyer and real estate agent is critical. Re-familiarizing yourself with the mortgage lending process is very helpful, if you haven’t purchased or sold your home in a while.

This particular has become incredibly important, as the rules for mortgages have changed drastically over the past several years, in what is a relatively short time span.

Your home purchase stakeholders will often use different names for the same terms. For example, a ‘Pre-Qualified’ and ‘Pre-Approved’ mortgage are the same.

There are ways that the home buyer can assist with the process. Being prepared with up-to-date documents for your mortgage lender. These documents include:

• T4 slip from previous year
• Notice of Assessments for the previous 2-3 years
• Current pay stubs
• All Credit and debt details
• Details about your employment history
• Identification
• Proof of Citizenship and Residency status

Credit Checks and Purchases During the Mortgage Approval Process

Having credit issues or applying for credit during the mortgage process can have a severe effect on your mortgage application and approval process.

During this period, take a break or pause any debt applications and any credit application activities, including credit checks, which may affect your credit.

It may be a good idea to defer these activities until you have moved into your home and the mortgage has been closed.

Pre-Qualified and Pre-Approved Mortgages

Pre-Qualified and Pre-Approved Mortgages – Similar Terms

Essentially, these two terms are similar, mortgage lenders and real estate stakeholders can often use these terms interchangeably. However, being ‘pre-qualified’ doesn’t not mean you have been ‘pre-approved’ for a mortgage.

Being pre-qualified by your mortgage lender is usually an initial step towards mortgage approval, however your mortgage has yet to be approved.

Pre-Qualification Process

Pre-qualification discussions with your mortgage lender usually focus on affordability, your debts, your income, and debt serviceability (and other items), it may even include a mortgage ‘stress test’ to ensure you can make your mortgage payments.

Many Steps in the Mortgage Financial Approval Process

There are many steps prior to having a mortgage approved, pre-qualification is only the first step.

Your mortgage lender may need an appraisal performed on your home, which may or may not be the same as the purchase value. If the appraisal is lower, that could be a big problem, and may require a larger down payment.

It is possible that the appraisal may only be performed once you have signed the ‘Agreement of Purchase and Sale (APS) and have requested a mortgage approval, which may affect closing timelines.

Be Proactive

Being proactive with your mortgage lender, early in the home buying journey is essential. Discuss these potential issues with your mortgage lender and ask for advice to limit any last-minute frustrations or surprises.

Your mortgage lender can help you navigate proactively throughout the process to limit approval issues.

Be Thorough With Your Mortgage Lender

Discuss and understand the entire mortgage approval process with your mortgage lender.  Review the value of the homes you are considering along with your affordability and being able to service the mortgage payments.

Ensure that you understand the mortgage lender’s appraisal process and it’s timing, and how that may affect your home purchase.

Mortgage Calculators Are Not Commitments

During your mortgage application meeting or discussion, most mortgage lenders provide you with simple mortgage payment calculators that will show you how much your payments will be based on varying down payments.

These calculators are not commitments.

A verbal approval or email may not be an official commitment to provide you with funds you will need, although it might be with some lenders. It is critical to understand the mortgage lending process specific to your lender.

Your mortgage specialist will need to outline their mortgage lending approval process with you and when your funds would be available.

Contact a Lawyer Early in the Process

At this early phase in your home purchase, it may be a good time to contact a lawyer. If you still have your lawyer from your last home purchase, great. If not, contacting a good lawyer (e.g., referral) early in your home purchase journey is vital, and who you should speak with

prior to signing important documents.

Mortgage Lender Communications

Most mortgage lenders have a formal communication process that includes notification of your mortgage approval, based upon current home appraisal, debt, credit history and income details.

This communication is often an email referencing your mortgage approval details, and perhaps an email attachment with an approval letter. Ask your mortgage specialist how they will communicate that official approval to you.

Mortgage Commitment Letter

Not be confused with ‘Pre-Qualified’ or ‘Pre-Approved’ mortgage terms, this term is usually used for the formal communication from your mortgage lender directly to your lawyer, indicating that mortgage funds have been allocated or available for transfer, usually the day of closing.

Obtaining a mortgage commitment letter indicates that the bank is satisfied that you are able to afford a certain loan, at a qualified interest rate. However, the mortgage commitment letter will contain various conditions requiring approval, prior to funding taking place.

Mortgage Approval Process Awareness – Selling Price vs. Appraisal Value

Appraisal Details

Another critical component that can affect the duration of a mortgage approval duration and process is the appraisal value of the home you want to purchase. Especially if the appraisal is performed during the mortgage approval process and the home appraisal value is now lower than the selling price.

Property Appraisal Process and Timing

There is a bit of a disconnect in the mortgage application process, in this regard.

It is uncommon for a lender to conduct an appraisal on a property until and unless you have signed and accepted an Agreement of Purchase and Sale. However, the appraisal of the property will directly impact the amount your lender is willing to lend you.

The reason being lenders have very strict rules on debt-to-equity ratios. That is, the lender will not loan more than a certain percentage of the value of the property (a value that is confirmed by their appraiser). It is a very much a chicken and egg scenario, as you won’t know what your lender will agree to lend, until your appraisal is completed.

But you won’t get an appraisal completed, until you have signed and accepted an Agreement of Purchase and Sale. This is why it is important to be very diligent when it comes to submitting an offer close to your “spending-limit”.

If the selling price of your home is higher than mortgage lender’s appraisal, this can cause stress, disappointment, and frustration, along with delaying, or even terminating the home purchase, and possible loss of a down payment.

Mortgage Approval Example

As an example, if the home you want to purchase is selling for $1,500,000, you will need 20% down for the mortgage (mortgage lender/bank lending maximum for your home is 80%).

The maximum mortgage amount (80%) would be $1,200,000 and your down payment would be $300,000.

However, if home values in your area have been declining, and the mortgage lender or bank’s appraiser now values the home for $1,350,000 instead and the house sale value is $1,500,000, the down payment will need to be increased to make up the difference. Which would be $420,000, a possible gap of $120,000.

This could be a deal breaker, if the home buyers are unable to increase the down payment.

Finance Conditions or Clauses

Be Careful Removing Conditions and Clauses

Competing for the purchase of a home is not uncommon. To be successful with the purchase of a home, agents and buyers often remove conditions or clauses that the seller may find obstructive compared to other buyers offers (e.g., finance or home inspection conditions).

Tread carefully with the removal of conditions which are included to protect your interests.

Risk Reward of Conditions and Clauses

You and your real estate agent will need to balance the risk/reward of adding or removing conditions and clauses.

As stated in the Mortgage Approval Process Awareness – Selling Price vs. Appraisal Value previously, if the ‘financing condition’ had been removed, the buyer would need to increase their down payment, and if not, they may lose their deposit or may be liable for other costs incurred by the buyer for the terminated deal.

Two of the most helpful suggestions based upon our experience, for prospective home buyers are as follows:

1. Ensure that you read and re-read documents, and thoroughly understand the entire process, and what you are signing

If you are unsure or uncomfortable, ask your lawyer, mortgage lender, or real estate representative for clarification or advice.

Start your planning early.

For example, ensure you understand the mortgage lenders approvals processes, sometimes ‘Pre-Qualified’ or ‘Pre-Approved’ doesn’t mean your lending institution has funds ready for you. Confirm the process with you mortgage lender, and              when the funds would be available for you to make an ‘offer’.

2. Set your expectations accordingly

The mortgage process takes time, there are many ‘moving parts’ and stakeholders. Some of these processes can work at the same time, others, need to wait for the previous step or process to be completed. Sometimes steps can get      delayed, which can impact the next step in the process.

Agreement of Purchase and Sale (APS)

One of the most important documents you will be signing will be the Agreement of Purchase and Sale (APS). You should become very comfortable in understanding the contents and the importance of this document.

The Agreement of Purchase and Sale is the written contract between the seller and the buyer. The specific details of the APS are the offer to purchase real estate property, land, and the purchase of a home.

The APS is referenced by the Ontario Real Estate Board (OREA). The APS includes the agreed upon price and the terms and conditions. This form contains page detail requirements and numerous number clauses and requirements.

To familiarize you with the APS, we have provided many of the items on the APS, detailed below:

The Agreement of Purchase and Sale includes:

• • Buyers and Seller names
  • Address and precise specifics of the property and it’s exact location
  • The purchase price
  • Deposit details
  • Home value balance funds payment details
  • Irrevocability date
  • Completion Date
  • Notices: Who is appointed and responsible for providing and receiving notices
  • Chattels: What is ‘included’ with the property
  • Fixtures which are excluded
  • Rentals items and rental contracts. Equipment that is being rented, e.g., water heater
  • HST obligations
  • Title Search and Requisition Date
  • Future use details, e.g., warranty
  • Title, details including registered restrictions, charges, liens, encumbrances etc.
  • Closing Arrangements, including lawyer APS completion details, location, funds exchange details etc.
  • Documents and Discharge, title deed details
  • Inspection, buyer inspection process and details
  • Insurance, insurance responsibilities of the seller and the buyer
  • Planning Act details
  • Document Preparation, Transfer/Deed details
  • Residency, residency/non-residency declarations
  • Adjustments, any outstanding items, such as rents, mortgage interest, realty taxes details etc.
  • Property Assessment details
  • Time Limits details
  • Tender, funds details, including dates and acceptable transfer types
  • Family Law Act, includes spousal consent details
  • UFFI, Urea Formaldehyde Foam Insulation declaration details
  • Legal, Accounting and Environmental Advice, advice disclosure
  • Consumer Reports, Buyer credit check
  • Agreement in Writing. Buyer and Seller agreement fundamentals
  • Time and date
  • Successors and Assigns. Stakeholder signatures
  • Spousal Consent, signatures
  • Confirmation and Acceptance, signatures
  • Information on Brokerage(s), Listing and Buyer
  • Acknowledgement, signatures

3. Timeline Expectations – What to Expect in the Last Two Weeks Before Closing 

Closing Day Timelines Vary and Fluctuate

A typical home purchase to closing process can take 30 – 45 days, more or less. Each situation is different and can be affected by the many different circumstances. There are many stakeholders involved with diverse responsibilities.

The Last Two Weeks Are the Most Active

There are many variables which can affect the entire timeline and duration. The last one to two weeks of that process are the most active and can require a great deal of your time and attention.

Real Estate Agent – APS Handoff to Your Lawyer

Once the Agreement of Purchase and Sale has been signed off and all conditions waived, and completed, and prior to closing, your real estate agent will send the copy of the signed APS to your lawyer who will begin the processes to complete the purchase.

Although the lawyer has received a copy, many home buyers have their lawyer read the APS in advance of its signing, which may help avoid disputes.

Understand Key Stakeholder Roles, Including Your Real Estate Agent and Your Lawyer’s Roles

When buying a property, you will want to meet with your lawyer to discuss their role, fees and how they can be of assistance to you.

During these discussions it would be worthwhile to discuss the services and searches available which of the lawyer’s services are appropriate for your purchase transaction.

Search of the Title of the Property

One of the primary functions of your lawyer’s responsibilities to you will be the ‘Search of the Title of the Property’ and ensure there are no prior claims.

The APS specifies that you will receive title to the property ‘free and clear’ of any claims, builder’s liens, easements, leases, judgments, previous mortgage declarations etc.

 Your lawyer will review many documents, including:

• Mortgage details, any outstanding mortgages on the property by the seller
• Home/property insurance coverage
• If a condominium, documents related disclosure statements, financial statements, bylaws
• If applicable, the property survey certificate
• Appliances, fixtures, and chattels included with the home purchase (APS)
• Mortgage financials. Ensuring that adequate financing is available on the day of closing
• Seller’s lawyer documents
• Zoning bylaws compliance
• If a new home, any warranties
• Property taxes are up to date
• No outstanding utility accounts balances
• If applicable, the property survey certificate
• Documents related to the condo, for example applicable bylaws, financial statements, disclosure statements, etc.

Be Patient

Some processes are aligned and are processed along the same timelines; however, many processes are sequential, or happen one after the other, which can take time as one stakeholder will be waiting for previous stakeholder work effort.

Be patient with your stakeholders. Your home purchase stakeholders are actively representing your interests.

Be Organized and Thorough

There are many factors which may help reduce timeframe prior to a home closing.

One of the factors is having a home buyer that is properly organized and prepared in advance of important milestones.

The home ‘closing’ can be a complex process, which includes:

• Negotiation
• Escrow Deposit
• Title Search and Title Insurance
• Home Inspection
• Home walk throughs
• Offer to Purchase preparation and submission (with your realtor)
• Purchase agreement preparation and finalizing
• Mortgage application completion
• Mortgage lending institution home appraisal
• Final mortgage loan approval
• Offer to Purchase, including:
  • purchase price
  • deposit amount and particulars
  • The Closing Date (the day you also take possession)
  • Request for Land Survey of the property
  • Conditions of offer, including financing approval, home inspection etc.
  • extra items to be included such as appliances, windows coverings, fixtures etc.)
• Agreement of Purchase and Sale acceptance signatures

Prepare for Closing Day Home Inspection

The Purpose of the Inspection

Closing day inspections are not an opportunity for additional negotiations.

Inspections are intended to ensure the home and its contents (fixtures and appliances) are aligned with the conditions of the sales agreement and that everything in the home is in working order.

Despite what the Agreement of Purchase and Sale may state regarding the number of visits you as the Buyer may be entitled to, the common-law provides for Buyers to conduct a final inspection of the property.

Our recommendation is to take advantage of such final inspection to ensure the condition of the property has remained unchanged.

In addition to a home inspector inspecting your home, you will need to thoroughly check the entire house and its contents the day of closing.

You should be preparing a checklist of every item and appliance which needs testing, including electrical, plumbing, gas, mechanical (e.g., garage door opener)

The day of closing is your only opportunity to ensure that everything in your home meets your APS expectations. After this day, any defects are the responsibility of the new homeowner.

Inspection Checklist

Having a pre-prepared checklist will help you stay focused and will help keep you from missing or overlooking something. A testing and verification checklist could include:

• Light fixtures and switches
• Faucets and taps. Running water, check under sinks for leaks. Check walls, ceilings, all floors for leaks or damage
• Turning all appliances on and testing
• Open and close all doors and closets, make sure they are working
• Check and test all plumbing fixtures (toilets, showers, tubs, laundry room area etc.)
• Open and close all windows and doors, including the garage door itself.
• Check the attic
• Check the entire outside of the property, any debris, garbage, or previous owner property

Additional Items to Consider

Contacting your utility accounts in advance of Closing Day is important. Contact them early in the process, to understand how much notice they need for transfer of the utility accounts. Do not leave this until the last minute.

Utilities to contact, include:

• • Electric
  • Gas (is the hot water heater rented or owned?)
  • Cable and internet
  • Phone
  • Alarm
  • Insurance
  • Moving company
  • Others

4. It’s Closing Day, What Can We Expect?

Closing day, or completion day, is one of the final steps in the home purchase journey. You haven’t received the keys to your new home; however, you are very close to it.

Your lawyer will have some work left to do, however you should have the keys to your new home no later than 6:00 p.m. on the day of closing.

Here are some practical steps to prepare you for your home on your Closing Date:

• Moving out, what appliances, fixtures, furniture etc. will you moving with you and what will you need?
• Unlocking your new home… but first things first. Before moving anything into your property on Closing Day, you will need to do a thorough final walk-through and inspection
• Check for damage or missing items. If appliances, fixtures, or other items were included, are they there? Do they work? Check all the electrical outlets, open and close all the windows, check the plumbing, look for any leaks, especially in the basement and on ceilings. Is everything operational and as they should be based upon the Agreement of Purchase and Sale.
• Once you have your walkthrough and inspection, prior to moving in, you may want to consider having the home completely, cleaned, carpets shampooed, windows cleaned, fireplace checked and cleaned etc.
• Prior to moving in, this may be a good time to do any painting or home improvements, while the house is empty. Having your home professionally cleaned, prior to moving in and after any renovations, should be scheduled in advance of moving your valuables into the home,
• Although a pool check should have been performed during inspection, check around the home and on the outside, for any damage or issues. If there is a pool, ensure that it is in running order, especially the pump, chlorinators, filters, heaters, skimmers etc. Check for leaks.

This is what to expect on closing day.

• • Provided that you have signed the necessary paperwork and documentation with your lending institution; on closing day your mortgage lending institution and your lawyer will be coordinating the transfer of funds to the buyer’s lawyer, and other home title and deed transfer duties. Your real estate agent may be contacted, if necessary
  • Once the funds have been transferred, your lawyer will register the home purchase at the Land Title Office, and you will be listed as the new owner of the property
  • This usually requires the whole closing day, your home keys (don’t forget to prepare to change all the locks) are usually released sometime in the afternoon, by no later than 6:00 pm. Lately, practices have involved leaving keys at the property in a lockbox, to reduce the travel time for buyers, so that they may head directly to the property once the transaction closes;
  • Your lawyer will also ensure that there are no last-minute claims on the property, release funds that have been held in their ‘trust account’, pay out adjustments as outlined in the APS ‘statement of adjustments’, including commissions, sales tax, and land transfer tax
  • Once the property is closed, and in addition to ensuring that the Sellers obligations are satisfied, your lawyer will provide appropriate documentation including a ‘Reporting Letter’, and an account of their applicable activities and fees related to the transaction

5. ‘Are Appliances Included? Not So Fast. Don’t Make Assumptions.’

The most common of issues which come up with home purchases are misaligned expectations, misunderstandings and disappointments related to appliances.

Work With Your Real Estate Agent About Your Appliance Expectations

There are limited opportunities to ensure that your expectations are satisfied when it comes to appliances. Your real estate agent can ensure that your expectations are included and clearly outlined in the Agreement of Purchase and Sale.

Appliance Inspection

Unless agreed upon between the seller and buyer, appliance inspection (and testing) is not usually performed during ‘walk-throughs’.

Appliance inspection could be included on home inspection. Ensure that they are the same appliances models and match your previous expectations and are in working order on the day of closing.

Appliance Functionality

Appliance inclusion is one thing; however, the condition and functionality of the appliances should be detailed.

Your home inspector can include the appliances when they inspect the property. With your instruction and direction, they can test the appliances to ensure they are working the day of the inspection, however you as the homeowner will need to immediately validate all the appliances themselves and test them yourself again on Closing Day.

Closing Day Testing

On Closing Day, walk through your entire home, test everything.

Turn all the lights on and off, flush all the toilets, turn on faucets, etc., put the dishwasher on, the clothes washer, the dryer, the air conditioner, and other appliances.

If your new home has a pool, check the filter, pump, heater etc.

Unless otherwise provided for in the Agreement, the appliances are only required to be in working order up to the end of the Closing Day. As of 12:01 am the day after Closing, if an issue occurs with the appliances, then as the buyer, such issue will be yours to deal with.

Appliances – Set Your Expectations Accordingly

Appliances breaking down on or before the Closing Date is an unfortunately common issue.

It also happens to be an issue that is difficult to resolve after closing. Once you as the buyer spend your money and purchase your new property, trying to get a seller to reimburse you for a minor repair/fix of an appliance is very difficult.

Notwithstanding that your agreement may provide for the appliances to be working as of closing, unless an issue is identified before closing, the seller may not feel “compelled” to compensate the buyer for the cost of the repair.

Reading and understanding documents is critical. Being clear about the home inclusion details is important and should be shared with your realtor representative.

The buyer’s real estate representative is a critical part of these details, ensure that the APS details meet with your expectations.

There also may be appliances you don’t want (unwanted lighting, electrical boxes, receptacles etc., which when removed, may cause damage upon removal, these damages should be fixed prior to possession and part of the inspection.

It is important for the home buyer to ensure that their real estate agent understands the buyer’s expectations regarding appliances included with the home purchase and the condition of the appliances and fixtures

Appliances and fixtures can include:

• Refrigerator
• Range/stove
• Dishwasher
• Washer and Dryer
• Water Heater
• Furnace
• Air Conditioner
• Water softener
• Air cleaners and purifiers
• Alarm system
• Pool appliances, including heaters, filters, chlorinators, and other pool accessories

These items need to be clearly detailed in the offer. What are the appliance and fixture expectations from the home seller, has it been defined prior?

 6. The Deal Fell Through. What Happens to the Deposit?

As mentioned in our section ‘Terms and Key Documents To Know Before You Get Started’ in our ‘Introduction’, a broker, realtor, or agent may claim their commission, even though the sale didn’t close. This could also be applied to any deposits currently held by your realtor’s brokerage. As we mentioned in the previous section, this would be very rare and uncommon. We’ve provided two relevant articles in our Sources and Links at the end of this post. As with most legal agreements, it may be a good idea to have a lawyer review legal documents with you prior to signing.

The home purchase transaction required a deposit. The deal was defaulted, reneged, or terminated some way by the buyer, so what happens to the deposit?

Seller and Buyer Rights

Is the seller entitled to the deposit outright? Does the home seller need to sue the buyer to recover the deposit? Does the home seller attempt to negotiate with the buyer who terminated or reneged on the deal over releasing all or part of the deposit? We’ll provide some possible answers to those questions.

Deposit Location

When a seller has signed a listing agreement with a Real Estate Broker, the buyer’s deposit will be paid into the seller’s Real Estate Broker’s Trust Account. Following which, the deposit can only be transferred out of the Real Estate Broker’s Trust Account, in one of the following situations:

1. The purchase/sale is completed.

2. The buyer and seller both provide unanimous direction to the Real Estate Broker specifying as to whom the deposit is to be paid; or

3. A Court orders that the deposit be paid to one or both of the parties.

The same principles apply in situations of a private purchase where the deposit has been paid to the seller’s lawyer, in Trust.

OREA Form

Nearly all real estate agreements are completed on an OREA (Ontario Real Estate Association) form of agreement of purchase and sale, so we will begin there.

Every OREA form has the following section pertaining to the buyer’s deposit:

“[The] buyer submits ($xx,xxx.xx), upon acceptance by negotiable cheque payable to [the] “deposit Holder” to be held in trust pending completion or other termination of this Agreement and to be credited towards the Purchase Price on Completion.”

None of the other provisions in the standard OREA form address the situation of what happens to a buyer’s deposit if he or she is unable or unwilling to complete the purchase.

If the two parties wish, they may insert an additional provision into a schedule to the agreement, setting out the terms confirming to whom the deposit is to be paid upon the buyer defaulting on the purchase.

Such provisions are typically rejected by buyers, as they do not want to risk suffering an immediate loss of their deposit, when the reason for their failure to complete the transaction, may be in dispute.

Deposit Outcomes

However, the law supports the seller being entitled to the deposit, in the event of a buyer defaulting under the agreement of purchase and sale and being unable to complete the purchase, (save and except what the contract may state or some rare exceptions).

Despite this deceptively simple answer, how and when a seller can get possession of the deposit, is a separate question altogether.

Unless both the seller and buyer can agree to what is to happen with the deposit in the event of the buyer defaulting, the Real Estate Broker/lawyer is typically restricted from releasing the deposit to the seller.

Court Orders

Where the parties are unable to come to an agreement with respect to what is to happen with the deposit, a Court Action must be started, and a Court order obtained, to determine who is entitled to the deposit.

At this point, each party will be burdened with proving why the deposit should be released to them, as opposed to the other party. However, unless the buyer can show that the failure to release the deposit to them would result in an unconscionable loss to the buyer, the seller will most often, be awarded the deposit.

Take-away points

You as the reader should take away the following points from this specific part of this post:

1. The starting position as it relates to entitlement to the deposit is: if a buyer breaches the agreement of purchase and sale, the seller is entitled to the deposit.
2. Where a buyer is unable to complete a purchase, and the parties cannot agree on what is to happen with deposit, then the deposit shall remain in the Real Estate Broker’s/lawyer’s Trust Account, pending a settlement agreement between the parties or a Court Order.
3. Where a buyer is unable to complete the transaction, the seller is required to mitigate his or her damages by attempting to resell the property.
4. Where the seller resells his or her property for less than the originally agreed to purchase price, the seller likely has a claim for the deposit, plus the loss suffered because of reselling the property at a less amount and any additional carrying costs.

Conclusion

Congratulations! You’ve made it to the end of this article.

Whether you have recently purchased or sold a home and are embarking on another home sale or purchase, or perhaps you haven’t purchased a home in a while, or if this is your first home purchase, we hope this article was of interest to you and that we have provided some level of value.

We’ve included a couple of our previous posts which may also be of interest to you.

You’ve Decided To Buy: 9 Insights To Help the First Time Home Buyer

Your First Home: Is Buying a Home the Right Decision for You?

If you would like additional information about Nichols Law, please visit our website.

Disclaimer

Sources and links are provided for source credit and attribution, and for additional information purposes only. Nichols Law is not affiliated, associated, authorized, endorsing/endorsed by, or in any way officially connected with any of the sources or links provided.

Sources and Additional Information:

The Globe and Mail; Seller beware: Even if the deal dies, the agent may still want their commission

CBC; Real estate agencies can collect their fee even if a buyer defaults on a sale, B.C. man learns

Toronto Star: When you’ve got the keys to your new home but the sellers haven’t left

Global News: Home inspections aren’t always an option. Here’s how buyers can protect themselves

ZOLO: Every Task a First-Time Homeowner Needs on Their Possession Day Checklist

Canadian Real Estate Wealth: How long does it take to buy a home in Canada?

REMAX: Ontario Real Estate Association (OREA) Form 100, The Agreement of Purchase and Sale (example)

The Brel Team, The Real Estate Lawyer’s Job: After the Contract Is Signed

WOWA: What Is An Agreement of Purchase and Sale?

Ottawa Sun: Agreement of Purchase and Sale explained

Sun Life: Buying a house: What happens after your offer is accepted?

CMHC: Buying Your First Home in Canada; What Newcomers Need to Know

Ontario Council of Agencies Serving Immigrants (OCASI): Should I sign a Buyer Representation Agreement with a real estate agent?

CMHC: Finance your home.Mortgage basics, pre-approval, loan insurance and tips for meeting with your lender or broker

OREA Listing Agreement: Form 200 Fully Explained

The Brel Team, The Financing Condition: What You Need To Know

CMHC: Home buying step by step

The Real Estate Council of Ontario (RECO): If I buy a house, how do I know if the appliances are included?

Bridgewell Real Estate Group: What Happens on Closing Day When Buying a House?

Paradise Developments: What Happens on a Closing Day in Ontario? (2021)

CIBC: How to avoid closing day problems

Mortgage InGenuity Inc.: First Time Home Buyers Guide: What about Pre-Qualification, Pre-Approval, and Mortgage Commitment Letters?

The BRELteam: Selling the House You Bought Last Year

Mortgage InGenuity Inc.: Your House-Closing Timeline: A Step-By-Step Guide

Remax: 10-Step Guide to Selling Your Home

Canadian Real Estate Wealth: How soon can you sell a house after buying it in Ontario?

The Real Estate Council of Ontario (RECO): Buyer Representation Agreements: Understanding the Fine-Print

CIBC, How To Avoid Closing Day Problems

The Balance, Tips for Doing the Final Walkthrough Before Closing on a Home

Nested Sage Real Estate, Why You Should Take Advantage of Your Buyer Visits