Your Questions:
So you've just purchased your first (or 10th) real estate property and you now have to find a lawyer to complete the deal. To complete the deal?? What does that even mean?. Dag nab it - why do I even need a lawyer!!?? And why is this whole thing so dang complicated? I know how you feel: you found your perfect home and you . . . just . . want . . to . . . get . . . . the . . . . keys!
Well, I admit, the process of buying a home is complicated and not much fun sometimes. But this post is designed to summarize and make the process . . . understandable! So let's see if we can do that. Stay with me.
Your Objectives:
Get Mortgage Financing – Obtain mortgage financing to pay for the purchase.
Get Legal Title – Purchase the home of your choice and obtain proper (“free and clear”) legal title (ownership).
Steps to Achieve Your Objectives
(by you, your realtor, and your lender - so BEFORE us lawyers get involved)
Contract: Make your purchase decision and sign Real Estate Purchase Contract (Purchase Contract) stipulating any conditions precedent (“subject to clauses”). These subject-to-clauses render the contract contingent upon certain conditions being fulfilled such as financing, home inspection, etc.
Conditions: Within the condition period, confirm the condition of the property (through a house inspection and review the Real Property Report concerning compliance with municipal land use bylaws) and confirm your financing arrangements. Remove your buyer’s conditions once you are satisfied with the inspection, your financing arrangements and any other conditions precedents in your offer.
Lawyer: Advise the realtor and your bank or mortgage lender who your lawyer will be; confirm that the realtor and bank has our email, fax and telephone numbers.
Insurance: Arrange for insurance on your home and have your insurance agent email or fax us a binder letter of insurance showing your mortgage lender as ‘first loss payee’.
Your Awesome Lawyer Now Steps In . . .
We usually receive the Purchase Contract sometime after conditions have been removed. Then:
The realtor will send us the Purchase Contract (along with other documents pertaining to the purchase).
Your lender will send us mortgage instructions.
Once we are in receipt of these two items we launch into action:
Do Searches: Conduct several searches and review the results, including title and property taxes to ensure title to the property being purchased is, or can be made, free and clear for your to own.
Confirm Title Description: Find out from you how you want your name (or names) to appear on title.
Prepare Buyer’s Documents: we draft, prep, and get ready the vast number of purchase and mortgage related documents.
Get the Seller’s Documents: We arrange with seller's lawyer to get the transfer of land on ‘trust conditions’ – these are the rules that we must follow in order to register the land in your name(s).
Deal with all the Money: We calculate the ‘cash to close’. This is really boring but man is it important. This is the amount needed to close the transaction! We have to adjust for things like property taxes and the money expected from your lender. The legal (legal fees) and closing costs (actual third party costs incurred by us such as Land Titles registration charges, couriers, searches etc), plus potential late interest charges that may be payable to the seller pursuant to the terms of the standard form Purchase Contract, are also estimated. Whew. All that number crunching gets us grouchy so forgive us if you call during this time. We'll reach out to you and get you to bring to us the cash to close, plus the legal and closing costs in the form of a bank draft or bank money order made payable to ‘Richards + Company In Trust’. Since the legal and closing costs is an estimate of the costs, usually some amount is left over – this is returned to you with our final report.
Meet with you: We then meet with you to discuss the various land conveyancing and mortgage documents; receive from you the closing funds in the form of a bank draft; and guide you in the proper signing of the documents.
Registration of Title: We deal with the Land Titles Office and register the transfer of land and mortgage.
Mortgage Funding: Obtain mortgage funds from your mortgage lender once conditions for funding are met. Most lenders require us to provide a fancy schmancy Solicitor’s Opinion regarding the title and confirming their mortgage is properly registered or we have other safeguards in place. And because we're - ahem - lawyers, they actually believe us and send us money! Is that awesome or what!? We may be able to close using either the Western Torrens Protocol closing procedure or title insurance in order to obtain funds and pay the cash to close prior to title registration.
Payment: Pay the total ‘cash to close’ to the seller’s lawyer; this is usually done on the morning of closing and possession passes at noon on the day of closing; the real estate agents will handle the release of the keys.
Handle Issues: Sometimes delays or issues occur:
the mortgage funding is late,
transfer documents are late from the seller,
you are late in delivering the money needed to close
the seller doesn't have a good Real Property Report and Compliance.
These delays and issues may or may not alter the timing of possession, depending on circumstances. Should any of these arise, we will explain the options and recommend a course of action.
Report: Finally, you will receive our ‘Home Purchase Reporting Binder’, with all the transaction and mortgage documents carefully tabbed and labeled for your future reference. These are SO amazing - you will love it. We can give it to you in a physical binder or digitally (pdf) format.
So there you have it: the purchase process in a nutshell. Check out our various other blog posts that fill in the gap on all this craziness. But understanding the outline above will sure help you feel a bit more sure-footed as you hike through the fog of the real estate purchase you're going though. Call us if you have any questions!
This is not meant to be, and should not be construed as, legal advice for your specific situation. You should contact one of our lawyers here at Richards + Company for further information and to discuss your particular facts and situation.
Darren L. Richards practices real estate and corporate/commercial law with Richards + Company in Edmonton, Alberta; he is rated as one of the ‘three best real estate lawyers’ in Edmonton.