By Jayson Schwarz LLM and Hamza Ahmad JD
One of the most common questions our clients ask us is, “When will I get the keys to my new home?” If the transaction is a typical purchase, our answer will be “Most likely by 6 p.m.” but when someone is selling a home to buy a new one, and the closing dates on both transactions is the same day, our answer may be lengthier and more qualified.
A standard Agreement of Purchase and Sale (“Agreement”) allows a purchaser until 6pm on the date of closing to fulfill their obligations to purchase the home. On a typical residential transaction, the purchaser’s lender will send mortgage funds to the purchaser’s lawyer, who will then send the full amount required to purchase the property to the seller’s lawyer. After the transfer of funds, a Transfer will be registered to legally convey the property to the purchaser.
Most funds are transferred by wire transfer, most of which occur almost instantly but some can take several hours.
If you are selling to buy, you will be at the mercy of the purchaser, their lender, their lawyer, and the timing of multiple wire transfers. If your sale closes before the 6 p.m. deadline, we then need to take all the same steps above to complete your purchase.
In a perfect world it all fits together. Our world is not perfect.
Remember your lawyer may be ready to go but for some reason the purchaser of your old house causes the inordinate delay and remember that purchaser has no obligation to get you the funds early enough to close your new home. If we receive funds from your purchase too late in the day (for example, 5:50 p.m.), we may not be able to complete the transfer of funds required to complete your purchase (bank wires are iffy after 4). At this point you have moved out with all your belongings in a moving truck, and you have no new house to move into. At the very least, you are left scrambling at the last second to find a spot to park your moving truck and worse than that where will the kids, the dog and you sleep?
Remember, you have breached your purchase contract because you could not close by 6 p.m., even though you did nothing wrong. Most sellers will allow an extension to the next business day. Many will ask you to pay any legal fees or other costs they incur. At worst, the seller can note you in breach of contract, terminate the agreement, take your deposit, and leave you with no new home.
How to Avoid Timing Issues on Closing
- Be Prepared!!! The Boy Scouts had it right! Have a back up plan in place in case it goes sideways.
- Almost every institutional lender provides bridge financing. This allows you to buy a new home before selling your current home by giving you a temporary loan, in addition to your mortgage, to be paid back on the sale of your home. Get a Bridge Loan and close your purchase first.
- If that does not work arrange for your goods to be picked up and held over night and close the sale first.
Remember most times it works out although the stress can be quite concerning. Get the right lawyer that understands your needs and works with you to try and meet those needs. Good luck and happy home hunting!!!
Perhaps the most difficult part of writing these articles relates not the actual writing, but thinking of a topic to address. So help us!!! Mail, deliver or fax letters to the magazine or to us, use the web site (www.schwarzlaw.ca), email (info@schwarzlaw.ca) and give us your questions, concerns, critiques and quandaries. We will try to deal with them in print or electronic form.
Also seen on NextHome.ca