Navigating Your Closing Day in Real Estate Transactions

What Happens on the Day of Closing?

The day of closing or the closing date is the day on which the buyers receive their keys. The sellers receive their sale proceeds, and the purchase and sale agreement is formally completed.

Purchase:

For a purchaser on a closing date, the lawyer usually waits for the mortgage funds from the lender. The lender is a financial institution, trust company, and/or private lender from whom the buyers have obtained a mortgage. Once the lender, also known as the mortgagee, funds the mortgage, the mortgage funds are directly deposited into the lawyer’s trust account. This usually takes place on the morning of the closing date.

Once the lawyer receives the mortgage funds, he or she will add them to the funds received from the clients. The mortgage and client funds are held in the lawyer’s trust account.

Once the lender has approved the release of the mortgage funds, the lawyer will prepare a wire, bank draft, certified cheque, or a direct deposit of the closing funds payable to the seller’s lawyer on behalf of the sellers. The closing funds are payable to the seller’s lawyer’s trust account according to the statement of adjustment under the heading “balance due on closing.” Once the buyer’s lawyer has sent the closing funds to the seller’s lawyer, they will send the proof of the wire or direct deposit along with the document “Direction re Title and Undertaking to Readjust” to the seller’s lawyer.

After the buyer’s lawyer has sent proof of closing funds or delivered the certified closing funds to the seller’s lawyer, the seller’s lawyer will confirm the receipt of the closing funds and closing documents and release the transfer/deed of land on Teraview (land titles electronic platform) for registration. The buyer’s lawyer must also confirm that they have received the seller’s signed documents.

The buyer’s lawyer will also sign the transfer for completion and release, registering it accordingly, along with the mortgage(s). The registration is always undertaken by the buyer’s lawyer. After the registration of the transfer, the buyer’s lawyer will notify the seller’s lawyer of the registration and obtain the lockbox code or release the keys to the buyers.

The buyer’s lawyer will notify the buyer that the purchase has been completed. The buyer will then be given the lockbox code or advised that keys can be picked up from the office. The buyers will also be emailed a copy of the registered transfer showing their ownership of the property. The seller’s lawyer is also notified of the closing by sending a copy of the registered deed.

Sale:

It is the closing date, and you are selling your house, condominium unit, cottage, or commercial unit. The receipt of the sale proceeds depends on how early the buyer’s lawyer receives the mortgage and buyer’s funds to send the closing funds to the seller’s lawyer.

The seller’s lawyer will send the buyer’s lawyer the closing documents and wait for the closing funds to arrive. The agreement of purchase and sale, under the heading “completion date,” states at which time and the date the agreement is to be completed. The usual time indicated on the agreement of purchase and sale is 6 pm. The registry system, Teraview, is only available for registration until 5 pm.

If the funds are received later than 5 pm but earlier than 6 pm, an “escrow closing” usually occurs. With an “escrow closing,” the seller’s lawyer will release the keys to the buyers even though the transfer has not yet been registered. The transfer is registered the next day. The seller’s lawyer will hold the funds received from the buyer’s lawyer in trust or release the closing funds to the seller.

Once the seller’s lawyer receives the closing funds from the buyer’s lawyer and the closing documents, the transfer will be signed and released electronically on Teraview, and the buyer’s lawyer will be notified of the release. The buyer’s lawyer will then register the transfer and provide the registered transfer to the seller’s lawyer to confirm the registration.

Upon the receipt of the registered transfer, the seller’s lawyer will provide the buyer’s solicitor with the lockbox code or authorize the release of keys. Once the transaction has been completed, the seller’s lawyer will pay off any existing mortgage(s) registered on title, pay the real estate agency for any outstanding real estate commission owing, and finally, wire or prepare a bank draft or a certified cheque of the remaining sale proceeds for his or her client(s).

A sale or a purchase closing date depends on the timing of receipt of the closing funds, mortgage, and clients’ funds. The earlier the funds are received, the faster a closing takes place.

For more information about your real estate transaction, kindly contact our real estate team at Malicki Sanchez at (905) 274-1650.

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by Gurpreet Bhogal