Once you agree to the sale price of a home, all parties on either end of the deal breathe a sigh of relief. After all, the tough part is over, right? Not so fast. There are many things that could go wrong before closing, meaning that there’s potential for headaches and extra costs. Here, Toronto real estate lawyer Mark Wiesleder shares some ways that you can ensure your closing process goes as smoothly as possible.
Buy and sell in the same market
Up until a little while ago, I was noticing some seller’s remorse – people who’d signed deals in January and supposed to close in May were looking for ways out of the deal because they were maybe downsizing and they didn’t buy in the same market, and now the downsized house was going to cost a lot more and they couldn’t afford it. I think whenever people are ready to buy or sell, they should be encouraged to do it in the same market. Don’t try to time the market. If you’re going to buy or sell, do it at the same time. Don’t wait three months or four months.
And try not to leave your closing dates more than 60-90 days delayed, because people start to get nervous if the market shifts a lot – and markets can shift. People are talking about how the Brexit vote, for example, might make real estate even more expensive here because Canada will be even safer. So this counteracts right away one thing all those doomsayers saying, that the market’s going to crash here. You just never know what’s going to happen in the market so you really have to just focus on the fact that interest rates are still so low, that no matter what happens to the market, you can manage the payments for five years if you lock in, so what’s the difference? Within five years, the market always comes back. So that’s the message I would give to any buyer if they’re afraid. It you can afford the payments, you can always lock in for five years and not worry about what’s happening to the market; you’ll be able to afford the payments. That’s all that matters.
Bidding errors can come back to bite you
The two biggest problems I’m seeing in terms of bidding is when you overbid and then the bank thinks you paid too much when they do their appraisal. Even though you were pre-approved for a mortgage, you’re not going to get it. Their appraisal has to come in. This is a danger, and I suggest that people have an additional 5 per cent down payment in reserve just in case.
Another problem is when people put in offers without a home inspection condition and are incredibly disappointed after closing. You should, if possible – even though it may be expensive – arrange your own home inspection before you make a bid. That way at least you know what the house is like, and if you go to a home inspection company in advance you might be able to make a deal: if you use the company for three or four inspections (in case you lose a few bidding wars), you’ll get a bit of a better rate. And once you’ve done two or three home inspections, you’re also better at it. You know what to look for yourself. So even if you spend $2,000 on a home inspections, if you’re looking for houses in the neighbourhood of $750,000 to over a million, I think that’s a good investment.
Schedule your closing dates carefully
I warn people against buying and selling on the same day. I think that’s a mistake. You should always buy a house first and then close your sale a few days later. Almost every bank will give you bridge financing because they know your house is going to sell. They’ll lend you the extra money for a few days so that you can close your purchase and move, and then when your sale closes a few days later, you pay it back. The advantage is that you’re not stuck if your buyer needs an extension. If your buyer needs an extension of a day and you find out at 5 o’clock on closing day, you’re in a moving truck, you’re sitting in front of your new house, and you don’t have any money to close the deal. And now you have no place to go. So it’s a big mistake people make and it can be avoided if they just close the purchase a few days before the sale. I appreciate that for some people, let’s say it’s a cash deal, it’s harder to get bridge financing. It is hard. I accept that. And so if you’re in a situation like that, you want to make sure that the people on either side of your deals are not also doing deals the same day. So if you’re buying from somebody and they need your money to buy something else, then you have a potential problem. But if they’re not buying [another place], if they tell you they’re going to rent or they’re doing something else, you figure you can arrange an extension pretty easily. You’re going to want to check on both sides – the person buying from you and the person you’re buying from – that they’re not also doing a deal the same day. That’s one way to protect yourself.
I also tell people to make a deal with the moving company, that if you have to store the furniture overnight or over a weekend that they give you a price in advance. I’ve seen them rip people off for thousands of dollars and the people have no choice. The stuff’s on the moving truck and there’s nowhere to leave it. So you want to maybe negotiate a price with the moving company, but that’s why you shouldn’t be buying and selling on the same day in the first place!
Double-dipping isn’t as common as you might think
Some buyers may be of the impression that if they go directly to the listing broker to put in an offer on a house that the listing broker will favour them because they’re earning more commission because they’re acting for both sides. So buyers think that if they do that they might be favoured and get a better deal. I find that in practice, that doesn’t happen. Most agents just refer this person to somebody else to put the offer in, so they’re not going to get any special treatment. And they may not get the service that they were getting from the buyer’s agent that they were dealing with from the beginning. People should really find an agent that they’re comfortable with, that has a good record, that protects people, that’s careful, and not try to go to these little shortcuts in order to get properties.
Don’t close deals on your own
When people do deals by themselves thinking that they’re going to cut out the commission, the agreements are done very sloppily. There are errors in them, and I find that the banks aren’t as trusting of them. Whenever people do these kinds of deals, I find that there’s always aggravation, which you don’t normally see when realtors are involved. Realtors sometimes get a bad rap for many issues, but usually they’re careful when it comes to details. Often when people do agreements themselves, so much is left to heresay and not put in writing, and it’s a fight later. People so focused on saving X amount in commission, they lose sight of what’s important: the due diligence they have to do before and during the process. So I find that when I see these private deals come in, they’re more aggravating than deals coming in from the traditional brokerage.
Mark Weisleder is a partner at Real Estate Lawyers.ca LLP, a boutique residential real estate law firm serving Ontario and the Greater Toronto Area. He has presented seminars for the Ontario Real Estate Association and IIR Telecoms since 1983 on subjects such as Real Property Law, Customer Loyalty, Customer Service Excellence, Professional Business Etiquette, Legal Updates and Privacy.
Buy and sell in the same market
Up until a little while ago, I was noticing some seller’s remorse – people who’d signed deals in January and supposed to close in May were looking for ways out of the deal because they were maybe downsizing and they didn’t buy in the same market, and now the downsized house was going to cost a lot more and they couldn’t afford it. I think whenever people are ready to buy or sell, they should be encouraged to do it in the same market. Don’t try to time the market. If you’re going to buy or sell, do it at the same time. Don’t wait three months or four months.
And try not to leave your closing dates more than 60-90 days delayed, because people start to get nervous if the market shifts a lot – and markets can shift. People are talking about how the Brexit vote, for example, might make real estate even more expensive here because Canada will be even safer. So this counteracts right away one thing all those doomsayers saying, that the market’s going to crash here. You just never know what’s going to happen in the market so you really have to just focus on the fact that interest rates are still so low, that no matter what happens to the market, you can manage the payments for five years if you lock in, so what’s the difference? Within five years, the market always comes back. So that’s the message I would give to any buyer if they’re afraid. It you can afford the payments, you can always lock in for five years and not worry about what’s happening to the market; you’ll be able to afford the payments. That’s all that matters.
Bidding errors can come back to bite you
The two biggest problems I’m seeing in terms of bidding is when you overbid and then the bank thinks you paid too much when they do their appraisal. Even though you were pre-approved for a mortgage, you’re not going to get it. Their appraisal has to come in. This is a danger, and I suggest that people have an additional 5 per cent down payment in reserve just in case.
Another problem is when people put in offers without a home inspection condition and are incredibly disappointed after closing. You should, if possible – even though it may be expensive – arrange your own home inspection before you make a bid. That way at least you know what the house is like, and if you go to a home inspection company in advance you might be able to make a deal: if you use the company for three or four inspections (in case you lose a few bidding wars), you’ll get a bit of a better rate. And once you’ve done two or three home inspections, you’re also better at it. You know what to look for yourself. So even if you spend $2,000 on a home inspections, if you’re looking for houses in the neighbourhood of $750,000 to over a million, I think that’s a good investment.
Schedule your closing dates carefully
I warn people against buying and selling on the same day. I think that’s a mistake. You should always buy a house first and then close your sale a few days later. Almost every bank will give you bridge financing because they know your house is going to sell. They’ll lend you the extra money for a few days so that you can close your purchase and move, and then when your sale closes a few days later, you pay it back. The advantage is that you’re not stuck if your buyer needs an extension. If your buyer needs an extension of a day and you find out at 5 o’clock on closing day, you’re in a moving truck, you’re sitting in front of your new house, and you don’t have any money to close the deal. And now you have no place to go. So it’s a big mistake people make and it can be avoided if they just close the purchase a few days before the sale. I appreciate that for some people, let’s say it’s a cash deal, it’s harder to get bridge financing. It is hard. I accept that. And so if you’re in a situation like that, you want to make sure that the people on either side of your deals are not also doing deals the same day. So if you’re buying from somebody and they need your money to buy something else, then you have a potential problem. But if they’re not buying [another place], if they tell you they’re going to rent or they’re doing something else, you figure you can arrange an extension pretty easily. You’re going to want to check on both sides – the person buying from you and the person you’re buying from – that they’re not also doing a deal the same day. That’s one way to protect yourself.
I also tell people to make a deal with the moving company, that if you have to store the furniture overnight or over a weekend that they give you a price in advance. I’ve seen them rip people off for thousands of dollars and the people have no choice. The stuff’s on the moving truck and there’s nowhere to leave it. So you want to maybe negotiate a price with the moving company, but that’s why you shouldn’t be buying and selling on the same day in the first place!
Double-dipping isn’t as common as you might think
Some buyers may be of the impression that if they go directly to the listing broker to put in an offer on a house that the listing broker will favour them because they’re earning more commission because they’re acting for both sides. So buyers think that if they do that they might be favoured and get a better deal. I find that in practice, that doesn’t happen. Most agents just refer this person to somebody else to put the offer in, so they’re not going to get any special treatment. And they may not get the service that they were getting from the buyer’s agent that they were dealing with from the beginning. People should really find an agent that they’re comfortable with, that has a good record, that protects people, that’s careful, and not try to go to these little shortcuts in order to get properties.
Don’t close deals on your own
When people do deals by themselves thinking that they’re going to cut out the commission, the agreements are done very sloppily. There are errors in them, and I find that the banks aren’t as trusting of them. Whenever people do these kinds of deals, I find that there’s always aggravation, which you don’t normally see when realtors are involved. Realtors sometimes get a bad rap for many issues, but usually they’re careful when it comes to details. Often when people do agreements themselves, so much is left to heresay and not put in writing, and it’s a fight later. People so focused on saving X amount in commission, they lose sight of what’s important: the due diligence they have to do before and during the process. So I find that when I see these private deals come in, they’re more aggravating than deals coming in from the traditional brokerage.
Mark Weisleder is a partner at Real Estate Lawyers.ca LLP, a boutique residential real estate law firm serving Ontario and the Greater Toronto Area. He has presented seminars for the Ontario Real Estate Association and IIR Telecoms since 1983 on subjects such as Real Property Law, Customer Loyalty, Customer Service Excellence, Professional Business Etiquette, Legal Updates and Privacy.
