A Short Guide to Residential Purchase and Sale Closings in Ontario
Real estate closings in Ontario, Canada, involve a series of legal and financial transactions that take place during the purchase and sale of residential homes. These transactions require the coordination of various professionals, including real estate agents, lawyers, and lenders, to ensure a smooth and legally compliant process. This comprehensive guide outlines the key stages and steps involved in the closing process for residential homes in Ontario. 1. Pre-Closing Proceduresa. Offer to Purchase and Agreement of Purchase and Sale
The closing process begins with the submission of an Offer to Purchase (OTP) by the buyer. Upon acceptance by the seller, the OTP becomes the Agreement of Purchase and Sale (APS), a legally binding contract outlining the terms and conditions of the transaction.
b. Mortgage Pre-Approval
Before making an offer, buyers should obtain mortgage pre-approval from a lender to ensure they have the necessary financing to complete the purchase.
c. Home Inspection and Conditions
A home inspection is recommended to identify any potential issues with the property. Buyers may include conditions in the APS, such as financing and satisfactory home inspection, to protect their interests.
2. Legal Representation and Searches
a. Retaining a Real Estate Lawyer
Both the buyer and seller must retain a real estate lawyer to represent their interests and facilitate the closing process.
b. Title Search
The buyer's lawyer will perform a title search to ensure that the seller holds a clear and marketable title to the property, free of liens or encumbrances.
c. Land Transfer Tax
In Ontario, buyers are required to pay a land transfer tax based on the purchase price. First-time homebuyers may be eligible for a rebate on this tax.
3. Financing and Mortgage Approval
a. Mortgage Application
Upon acceptance of the APS, the buyer should submit a formal mortgage application to their chosen lender.
b. Appraisal
The lender may require an appraisal to verify the property's market value and ensure it meets its lending criteria.
c. Mortgage Approval
Once the lender is satisfied with the appraisal and other conditions, they will issue a mortgage commitment letter, confirming the mortgage approval.
4. Closing Preparations
a. Statement of Adjustments
The buyer's lawyer will prepare a Statement of Adjustments, outlining the financial details of the transaction, including the purchase price, adjustments for prepaid expenses, and the balance due on closing.
b. Pre-Closing Documentation
The buyer's lawyer will draft the necessary documents, such as the mortgage, deed, and any other required legal paperwork.
c. Pre-Closing Walkthrough
The buyer should conduct a final walkthrough of the property to ensure it is in the agreed-upon condition and to identify any potential issues before closing.
5. Closing Day
a. Transfer of Funds
The buyer's lawyer will transfer the funds to the seller's lawyer, including the purchase price and any additional closing costs.
b. Registration of Title and Mortgage The buyer's lawyer will register the transfer of title and the mortgage with the appropriate land registry office.
c. Key Exchange
Once the transfer is complete, the seller will provide the keys to the buyer, officially transferring possession of the property.
6. Post-Closing
a. Title Insurance
The buyer may obtain title insurance to protect against any unforeseen title issues that may arise after closing.
b. Property Taxes and Utilities
The buyer is responsible for ensuring that property taxes and utility accounts are transferred into their name after closing.
Conclusion
Understanding the closing process in Ontario is crucial for both buyers and sellers of residential homes. By following the steps outlined in this guide and working with qualified professionals, parties can ensure a smooth and successful real estate transaction.
