TYPICAL ROLE OF A BUYER IN A REAL ESTATE PURCHASE TRANSACTION
A typical real estate transaction involves multiple parties which may include: the buyer and seller, the real estate agent, mortgage broker, representative of the bank / lender, insurance companies, as well as lawyers on both ends of the deal – one for the seller and another for the buyer. Once you have selected the lawyer to handle the ‘closing’ of your transaction, there are a series of steps that your lawyer will undertake on your behalf in order to complete the transaction. This will involve you and your lawyer to collect information from the above-mentioned parties. Therefore, as a buyer, it is critical that you play an active role in providing information and being accessible to the lawyer to ensure that your closing is completed in a timely fashion.
So what could the lawyer expect of you as the buyer? The information below offers an insight into the sort of things you would likely be involved with:
Provide your lawyers information to:
- Your Realtor: The real estate agent requires details of the lawyer’s office including the name, address, email, phone and fax number in order to send the agreement of purchase and sale to the lawyer’s office.
- Your Bank representative or Mortgage broker: The representative will forward the necessary ‘instructions’ to your lawyer to prepare and review mortgage related documents.
It is important that your lawyer’s information is passed on to the above-mentioned parties as soon as possible to avoid any difficulties or delays or to avoid missing important timelines.
Be in contact with your lawyer:
- It is not uncommon that your phone number and other contact information changes before your final closing date. You must keep this up to date with the lawyer’s office to make yourself accessible for information and / or setting up a meeting. If you provide email as a method of contact, be sure you access it frequently.
- Provide your lawyer’s office details with respect to your intended use of the property. Is it an investment property? Will you be occupying the property? Are you a first time buyer?
Provide any other paperwork to your lawyer:
- If you are buying a condominium, you may have a set amount of time in which your lawyer is to review the status certificate. It is your responsibility to ensure that the lawyer receives a copy of the status certificate and has sufficient time for review. Your realtor may be able to assist in gathering the status certificate and delivering it to your lawyer.
- Your lawyer will review your agreement and also answer any questions you may have regarding the closing process.
Order Fire Insurance:
- Fire insurance is a requirement when purchasing a home (as opposed to a condominium – unless specified). Your lawyer will advise you of the particulars of how to set it up. You will have to speak to an insurance company / representative in order to set it up.
Preparation for meeting with Lawyer:
- It is typical for a potential buyer to actually meet with a lawyer in person for the first time right before closing. Prior to that, you will be in touch with the law office several times by phone to provide or receive information.
- Prior to meeting with your lawyer, you will be required to provide certain information such as: parties who are taking title to the property; the manner in which the parties will take title; name and date of birth details; spousal consent particulars; fire insurance set up; and any other information required to complete your transaction. As a result, keeping continual contact and being accessible is very important.
- Your lawyer’s office will also provide you a draft trust ledger prior to your meeting. Assuming the lawyer has all mortgage instructions on time, he or she will know how much money will be advanced to the trust account prior to closing. The remainder of the ledger will include figures such as legal fees & disbursements, land transfer tax figures as well as adjustments from the seller’s lawyers. The lawyer will also specify the amount you are required to bring in at the meeting (usually by way of a bank draft) along with details of who it is to be made payable to.
- You will also be required to bring with you items such as: 2 pieces of valid and unexpired IDs; Fire Insurance particulars (if not already provided); Bank Draft; and any other necessary documents.
- The meeting will usually take anywhere from 30 minutes to 1 hour – depending on the transaction. Your lawyer will go through all the documents including those required by your lender.
- The meeting is usually held a few days prior to the closing date and will be scheduled in advance.
- This is a great opportunity to ask any further questions.
Pick-up your keys!
- Once registration is complete, the lawyer will contact you to come in to pick up the keys to your new home ! Note that keys will only be released once everything is fully registered.
Sometimes, those who may have trouble qualifying for a mortgage may enter into this type of arrangement with a potential Seller. In a rent to own, the Seller is essentially financing the buyer / tenant’s purchase of the property until you can qualify for the same and buy it.
Often this involves an “option to purchase” under which the buyer is not a buyer in a true sense but only a tenant with an option to buy which he or she may exercise at a future date depending on the contract. This typically involves a deposit to be paid along with a higher than normal rent payment which is structured for a certain time until the option can be exercised. Further, some agreements may be set up so that a portion of the rent payment goes towards the down payment.
It is important to have this agreement structured properly so all parties are aware of their rights and obligations. A buyer has to understand the legal difference between being a tenant and not yet a buyer and the risks he or she faces in relation to both the deposit and the down payment. There are plenty.
It is also important to ensure that a mortgage lender will recognize the “down” payment given to the owner / seller to truly be a “down”. If the bank does not, it may mean that the option to purchase cannot be exercised – thereby leading to a scenario the potential buyer may risk losing their deposit / down payment.
It is important to consult a lawyer to discuss this further
This article is for information purposes only and does not constitute legal advice and does not create any solicitor-client relationship. Please contact your legal representative and accountant.Read More