Periodic tips and reminders to help focus your by-owner marketing and win your commission-free sale - from Canada’s by-owner web-site, www.privatelist.com.

THIS ISSUE:      The Closing Process

ARCHIVES:     www.privatelist.com/newsletter.htm

THE CLOSING PROCESS

Ta-daaaaa! Negotiations were successful, and you’ve an agreed offer to purchase. Now what?

The steps that lead from hand-shake to exchange of keys are not that onerous, particularly if you know what to expect. Here’s the typical routine, seen from the purchaser’s point of view (the seller’s side is even simpler). . .

preliminaries

• the purchasers find a good lawyer at the start of their home-search and obtain a written estimate of their likely closing costs - including disbursements, fees and adjustments - and
   
• advice on how to take title: couples can register as either joint tenants (if one purchaser dies, all interest in the property automatically goes to the surviving spouse) or as tenants in common (the dead partner’s will determines what happens to his/her share);

the purchase agreement

• the deposit cheque is made payable to the vendor’s lawyer IN TRUST;
   
• any uncertainties about the meaning of the agreement are dealt with by way of a 2- or 3-day condition "subject to review as to form and content by the purchasers’ lawyer";
   
• all documents - and changes to documents - are dated and signed/initialled by each party;
   
• the lawyers’ copies are delivered to them promptly;

the purchasers deal with the conditions

• the purchasers arrange for house-inspection and/or any other conditions in the offer, prior to the relevant deadlines, and provide written notice of their removal to their lawyer and the purchasers (occasionally the vendors have conditions of their own to deal with, as well);
   
• the purchasers arrange financing (the lender will usually require that an appraisal be done), and ensure that their lawyer receives a written committment and details from the lender once their loan is approved;
   
• the lender may also require a current land survey, so if one is not available from the vendors, the purchasers should seek their lawyer’s advice immediately (title insurance may obviate the need for a survey - and other disbursements);
   
• the purchasers also arrange for fire insurance (required by the mortgage lender, and usually a 1-year prepaid policy at least), to begin on possession date, and make sure that the insurance company provides their lawyer with written confirmation that the policy will become effective on the closing date and that it is sufficient to protect the lender’s stake in the property;

once all conditions are removed from the offer

• the purchasers’ lawyer does the first title search to confirm vendors’ right to sell, identify and deal with any claims against the property, and ensure that the sale complies with all applicable legislation (zoning by-laws, for example);
   
• the purchasers’ lawyer also collects information regarding utilities pre-payments or arrears, leased equipment included in the sale, pre-paid taxes, etc. - to use as the basis for a statement of adjustments which assures that, on closing, each party will pay only for the claims that apply to their time of ownership;
   
• another search seeks out municipal liens, building and zoning regulations and legal judgements against either the vendors or the purchasers - anything which might affect the lender’s interest in the property;
   
• if these searches turn up any problems, the purchasers’ lawyer writes his counterpart requesting written undertakings that the encumbrances will be removed;
   
• the purchasers’ lawyer prepares the paperwork for the new mortgage and takes whatever steps necessary to guarantee that any conditions noted in the lender’s committment letter have been complied with;
   
• both purchasers and vendors make moving arrangements and contact the appropriate utilities regarding the closing of old accounts and the opening of new ones;

2-5 days before closing

• the purchasers visit their lawyer to sign all necessary documents and turn over a certified cheque for the money they will owe on closing, including the balance of the down payment and all fees, disbursements and adjustments; the vendors’ lawyer will have prepared a similar statement by now for the vendors;
   
• the purchasers’ lawyer places their cheque in his/her trust account and sends the signed mortgage documents to the lender so that mortgage funds can be released on closing day;
   
• purchasers’ lawyer prepares the mortgage and title documents for registration, and readies certified funds, according to the vendors’ instructions, to transfer to their lawyer;

closing day

• mortgage funds are by now safely in the purchasers’ lawyers’ trust account;
   
• purchasers’ lawyer does a final search for any last-minute claims that may have been registered against title, vendors or purchasers;
   
• documents, closing funds and keys are exchanged between the two lawyers, often at the local land titles office;
   
• purchasers’ lawyer registers the transfer of title and the new mortgage (if any); vendors’ lawyer registers discharge of their old morgage (if any);
   
• purchasers’ lawyer turns house keys over to purchasers; vendors’ lawyer hands over proceeds of the sale (minus fees, disbursemens) to vendors;

after closing

• purchasers inform their lawyer immediately if anything is missing or damaged when they take possession of the property;
   
• purchasers’ lawyer provides them with a letter certifying their new title and reviewing the entire process, as well as copies of all documentation, including a statement of account, trust-ledger statement, survey certificate, duplicate land transfer/deed, and copy of the new mortgage;
   
• vendors’ lawyer provides his clients with a similar wrap-up.

And that’s it: a common-sense process to ensure that purchasers get clear title to their new home, lenders are covered against potential loss of their collateral, and vendors are reimbursed for the purchasers’ rightful share of any pre-paid expenses.

Of course, minor problems may arise at any point. But by talking to your lawyer early in the process, getting a clear idea of likely closing costs (see our Nov 1/99 newsletter, and staying on top of your purchasers’ progress in dealing with any subject-tos, you stand a very good chance of reaching the end of closing day totally-exhausted perhaps, but with a real sense of satisfaction and achievement.

FRIENDLY REMINDERS . . .

Are the thousands of dollars you'll save by selling privately worth, say, an hour each week-end, spent reviewing your progress to date and mapping out your continuing campaign?

It's important to maintain an active marketing focus until your property is sold. Therefore, each e-mail version of this newsletter links to a series of reminders, tips and tools that lead to a sale!

To access these resources, press here.

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