It may have taken months, or maybe years, of preparation. But you’ve finally saved up a down payment, zeroed in on your dream home and made an offer. Now the sellers have accepted and you’ve settled on a closing date. Soon, your new home will officially become yours.
So what’s left to do?
Celebrate – then get ready to do some more work. Once the seller has accepted your offer, it’s time to prepare for the closing date. There will be more expenses to prepare for and more experts to consult. Here’s what to expect:
Why you need a lawyer when you buy a house
The next step in the process is for the deal to become “firm.” That happens when you and the seller have met all the conditions of sale (if there are any) by the stated deadlines. A firm offer is a legally binding contract.
- Not quite that far along in the process? Read: What you need to know before making an offer on a home
Up to this point, you’ve probably spent most of your time working with your realtor. But now your lawyer and lender come in.
“A lawyer makes sure you get everything you bargained for,” Nathaniel Brettle, a real estate lawyer at Malo, Pilley and Lehman in Toronto, says.
If you don’t already have a lawyer, Brettle suggests asking your realtor for referrals. Use recommendations from friends and family as a starting point – not necessarily the final word.
“You should meet with any prospective lawyer,” he says. “Or at least make a phone call. And always shop around.”
What can keep your home purchase deal from closing?
Your lawyer will begin a title search to scan your province’s land-registry records for roadblocks that could keep your deal from closing. Such roadblocks include liens, which are claims against the property due to the previous owners’ unpaid debts. There could also be outstanding mortgages or zoning issues.
“There could be a mortgage on the home, for example,” Brettle says. “Your lawyer will tell the seller’s lawyer that the seller must pay off that mortgage and prove they’ve done it before closing.”
What is title insurance?
Your lawyer will also set you up with title insurance. That will protect you from issues that could threaten your ownership. For example, there may be liens or other debts that didn’t show up in a title search. There may be survey errors such as a miscalculated lot line. There may even have to be adjustments if, say, part of your garage turns out to be on your neighbour’s land.
For this coverage, you’ll pay a one-time fee that’s tied to your home’s value and varies by province. The cost can range from $225 for a home selling for under $1 million in Vancouver, to under $300 for a home up to $500,000 in Halifax, to as much as $1,200 for a $1-million property in Toronto.
Speak with your bank or mortgage broker – and your advisor
You’ll also need to meet with your bank or mortgage broker in advance. In that meeting, you’ll arrange your mortgage so that funds will smoothly transfer to your lawyer’s account for delivery to the seller on closing day. If you were pre-approved for a mortgage, check that the pre-approval is still valid. If not, you’ll need to be re-approved.
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Jump on this early, as it’s a multi-step process.
“[Your lawyer gets] the mortgage instructions from the bank and puts together a mortgage. Then you have to come in and sign the documents,” Brettle explains. “The lawyer sends those documents back to the bank. Then the bank’s underwriters look over everything again and may send further conditions back to the lawyer.” At best, the process can take several days.
Your mortgage lender may offer mortgage insurance. But before you buy, speak with an advisor about mortgage protection insurance. That’s a combination of term life insurance and critical illness insurance that you may find more flexible and useful than mortgage insurance. Mortgage protection insurance can reassure you that your family will be able to cover the mortgage payments if something happens to you.
Why book a home inspection?
If you didn’t get a home inspection done as a condition of your offer, now is a good time to do it. To make sure all is well with the foundation, furnace and other important features of your new home, bring in an expert to conduct a thorough home inspection before you close. This is an especially good idea if the home you’re buying is older or has been renovated.
“Home inspectors are essential,” says Ken Clark, broker/owner at ACT Realty in Winnipeg. “Their reports tell you things like how to service the furnace and how to be careful about downspouts and drainage.”
An inspection can cost around $400. Clark sees a professional assessment as money well spent, however. “For example, the inspector uses a mirror mounted on what’s essentially a selfie stick to look under the furnace’s heat exchanger and determine the state of the entire furnace,” he says.
Important things to do before closing a home deal
In the weeks before closing, you may also have a few chances to visit your new home to do things like measure the windows for drapes. Take full advantage of these opportunities.
- See if anything needs to be fixed. “Check out the home entirely while you’re there,” Brettle advises. “If anything is broken, you can address it before closing. It can be tough to get sellers to compensate you after the deal is final.”
- Book a mover. Decide whether you can get by with a rented truck and a few friends, or you need to call in the pros. If you’re moving at a popular time (like July 1 in Quebec), you’ll need to book your mover as far in advance as possible.
- Get insurance. This is also the time to confirm that you have home insurance. You’ll need proof of insurance to finalize your mortgage and close your deal.
What happens on closing day?
On closing day, your lawyer transfers your mortgage funds and down payment to the seller and registers the deed in your name. The deed is the legal ownership document for your home. Registering the deed transfers title (the legal term for ownership) from the previous owner to you.
You’ll also pay your lawyer’s closing costs. These may include your province’s land-transfer tax, legal fees and adjustments. (See “Your closing checklist” below.) Once all that’s firmed up, you can take a deep breath. You finally get the keys.
What happens after closing day?
This brings us to your first few days of ownership.
“The first thing you’ll want to do is change the locks,” Clark says. “When you buy a property, you don’t know who has keys. The previous owners may have given copies to relatives, gardeners or repair people, for example.”
“You’ll also want to change the furnace filter,” he adds. “The previous owners are likely to have forgotten to do this in their rush to leave.”
Finally, get out and meet the neighbours. “They’ll give you referrals for things like snow clearing and contractors they’ve used,” Clark says. “And meeting face to face just lets everyone get to know one another and live as a community.”
Closing-a-home-deal checklist for buyers
After your deal has become firm, follow these simple steps to make your way to closing:
- Meet with your bank or mortgage broker to get your mortgage in order. When you make your appointment, be sure to ask exactly which documents you need to bring with you. That way you can avoid administrative delays. Talk to your advisor about mortgage protection insurance.
- Get homeowners’ insurance. You’ll need proof of this to close your deal.
- Hire a lawyer to review the approved offer (known as an agreement of purchase and sale in Ontario), conduct title and other relevant searches and line up title insurance.
- Hire a home inspector and, ideally, visit the property while your inspector is there. Make sure you book other visits, as agreed to in your purchase agreement, to check over everything for yourself, too.
- Review the statement of adjustments. The seller’s lawyer compiles this document, which lists any costs the seller has already paid. For example, the property taxes might be paid up for the full year. If your closing date is June 1, you’ll have to repay the seller for the remaining seven months.
- Book a mover. If you’re moving into a condominium, remember to book the building’s elevator as well.
- Change your address. To be completely sure that everyone who needs to know is aware that you have moved, Ken Clark recommends contacting companies you deal with individually. That’s in addition to requesting a blanket Canada Post change of address.
- Have utilities installed including electricity, water, home phone/Internet/cable and heating fuel, such as natural gas or oil.
- Meet with your lawyer within a few days of closing to sign documents and submit your down payment – minus the deposit, plus relevant closing costs.
- Pick up the keys from your lawyer on closing day.