Closing: Understanding your Legal Buyer Obligations

So you’ve made a successful offer to purchase the home of your dreams, or at least have taken that crucial first step toward home ownership. Now what? At this point, typically, there is a bit of a waiting period. Closing periods can take several weeks to a few months, but some essential buyer obligations must happen quickly.

Once your offer has been accepted, if there were any conditions, there’s a period during which you take all the necessary steps to fulfill them. This may include securing financing, home inspection, selling your current residence, and everything else that needs to happen before you officially seal the deal. Your mortgage lender will need a copy of the offer to ensure everything is in order and that the offer is in line with your pre-approved financing level.

What to Do During the Home Inspection

Your building inspector will discuss their overall approach and how their findings will be shared with you. Your real estate agent will be able to advise you as to the most likely strategy to be taken by building inspectors in your area.

If permitted, consider accompanying the inspector throughout the home inspection process, which usually takes about three hours. This will allow you to learn as much as possible about the various home systems: heating, plumbing, electrical, and roofing. The home inspection may also identify some repairs that need to be made so that you have a better idea of the home’s condition before proceeding with the deal.

At the end of the conditional period—with any adjustments or repairs made to your satisfaction, your real estate agent will finalize the deal, and your lawyer will process the paperwork, including the mortgage documents, with your lender. All of this will point to a final date of actual legal possession: The real closing day.

What Happens Leading Up to Closing Day

As a buyer, it is essential to understand your legal obligations at closing to ensure a smooth and successful transaction. The following things will happen leading up to the date of closing:

Signing the Deed – The deed is a legal document that transfers property ownership from the seller to the buyer. It is essential to carefully review the deed before signing to ensure that all the information is accurate and reflects the terms of the sale.

Closing Disclosure – The closing disclosure outlines the final terms and costs associated with the home purchase, including the purchase price, closing costs, and additional fees. The buyer must review and sign this document to acknowledge that they understand the terms of the sale and agree to the final costs.

Paying Closing Costs – The buyer is responsible for paying closing costs, including fees associated with the loan, such as appraisal, origination, and title insurance fees. It is essential to understand these costs and have the funds available to pay them at closing.

The transactions will be processed through your lawyer and bank on the possession date. Once they are complete, you can get your keys and start moving in!

Post-Closing Obligations

The work doesn’t stop once the closing date has passed. There are several post-closing obligations that buyers must meet to ensure a smooth transition and avoid potential legal issues, including:

Close the Deal – Even if the financing falls through, the buyer is still obligated to close. There is no backing out of the deal once the paperwork is signed.

Recording the Deed – Recording the deed establishes the buyer’s legal ownership of the property and ensures that the property is correctly transferred from the seller to the buyer.

Maintaining Home Insurance – This will be a condition listed by the lender and set up before the closing day. Once ownership of the home is transferred, the buyer is responsible for maintaining home insurance after closing to protect against potential damage or loss. Review the insurance policy carefully to ensure that it meets the buyer’s needs and covers potential risks associated with the property.

Honour Leases – If the property has tenants, the buyer is legally obligated to honour the original leases.

Repay RRSP Funds – If the buyer purchased the house as part of the First-Time Homebuyers Program, they are legally obligated to replace the funds they took out of their RRSP for the down payment. These payments can be spread over several years, and failure to repay will result in the amount being considered additional income on their taxes.

In addition to these critical post-closing obligations, there may be other tasks that the buyer needs to complete depending on their specific circumstances. For example, if the property is part of a homeowners association (HOA), the buyer may need to pay HOA fees and follow additional rules or regulations.

Failing to meet post-closing obligations can result in legal issues, financial penalties, or property loss. Seeking professional help from a real estate attorney or agent can help ensure that all post-closing obligations are met and that the transition to homeownership is smooth and successful.

Welcome Home!

Understanding your legal obligations as a buyer upon closing is a crucial part of the home-buying process. Seek professional help from a real estate attorney or RE/MAX agent to ensure all obligations are met and the home purchase goes smoothly.

Before long, you’ll be settled in the new place you call home.