What Happens on Closing Day? The Inside Scoop Revealed

Closing day is one of the most exciting days in a home owner’s journey. But what has to happen before you get the keys? A real estate lawyer offers a behind-the-scenes look at what takes place on closing day.

Closing day — the day your new home officially becomes yours. As you might expect, a lot of work goes into ensuring a smooth and timely closing — but homeowners often don’t know just what has to happen before the keys are handed over.

To get the inside scoop on what happens on closing day, RBC recently connected with real estate lawyer Yang Wang, who shares the steps involved and answers the key questions homeowners have.

Can some of the closing work be done before the closing day?

Yang Wang, Barrister and Solicitor of the Yang Wang Law Professional Corporation, explains that a great deal of the paperwork can take place in advance of closing. “Searching title, arranging property insurance, securing title insurance and signing documents can all take place before closing day,” he says. Getting much of the work out of the way ahead of time is important and in fact crucial for a smooth closing.

If the advance work is done, what’s left to do on closing day?

Yang explains that on closing day, real estate lawyers representing the buyers will do three things.

• First, if there is a mortgage on the home, they will receive the mortgage money from the lending bank. “On the morning of the closing day, the bank will either wire the funds or deliver a bank draft to the lawyer’s trust account,” Wang explains. Then, the required purchase funds (subject to certain adjustments, such as paid deposits, property tax adjustments, condo fees, etc.) will be sent to the seller’s lawyer, which includes the mortgage funds as well as the down payment and the other transaction costs.

• The second step is to verify all the paperwork. “We verify that the previously drafted closing documents are properly signed, the property insurance and title insurance are in place, and any conditions are fulfilled,” Wang says. “We have to examine everything, even the spelling on the documents — it’s a very thorough process.”

• The last step — once both the buyer’s lawyer and seller’s lawyer confirm that everything is correct and in place – is to register the property, transfer ownership to the buyer and register the security for the lender.

What happens if not everything gets done on closing day?

Wang explains that if the closing date needs to be extended for the buyer, it is typically mutually agreed upon by the buyer and seller — but there is often a cost associated with extending the date. “Usually, the buyer would have to propose to compensate the seller for costs that may be incurred by the extension, and the seller may accept in order to preserve the transaction and avoid lengthy and costly litigation,” he says.

But the law is such that if a buyer cannot close the deal on the agreed-upon date, the seller has the option to relist the property for sale and the buyer may lose their deposit (and the home). In other cases, additional costs may be incurred if the delay affects the seller’s ability to close a home they have purchased. A domino effect might be costly.

“Most of the time both parties will agree to an extension,” assures Wang, but encourages buyers to be organized well before closing to avoid a delay.

Related story: HOME BUYING 101: Your Home Buying Dream Team

What are some common surprises home buyers encounter?

“Many times, new home buyers aren’t aware of the additional costs that come with purchasing of their property, such as land transfer tax,” says Wang. “They often just think it is the down payment and the mortgage.”

He also says that owners are often surprised by the amount of time it may take for funds to transfer from their lender to their lawyer. “Money transfers aren’t always immediate,” says Wang. “Even if we request funds from the lender days in advance, it can take the full day for the money to arrive on the closing day,” he says, sharing he’s often telling anxious buyers that there is nothing to worry about. “Sometimes it just takes more time than expected.”

Unfortunately, some buyers are also surprised by the condition of the property once they get the keys. “When a house is staged it looks really beautiful and perfect, but after closing, owners may discover property defects and damage.”

What are steps buyers can take to have a smooth closing process?

Wang discussed the following steps that may be beneficial for buyers to consider:

• Get your paperwork done in advance. It’s wise to get as many documents gathered and signed in advance as possible, so your real estate lawyer can request mortgage funds first thing in the morning and leave enough time for the remaining steps required on closing day.

• Choose your mortgage provider sooner rather than later. While you may wish to shop around for a lender, it’s a good idea to make your decision well in advance of your home closing, as your lawyer needs time to work with the bank, understand the conditions of the mortgage and create the necessary paperwork.

• Visit the property well in advance of closing. As you’re finalizing the purchase agreement, it’s a good idea to add one or two pre-possession visits as a condition. These visits can allow you to examine the property and ensure it’s in the same shape as when you made the offer. “You want to visit far enough in advance that if there are damages, you have time to make your real estate agent and lawyer aware, and get things fixed before the home closes,” says Wang.

• Read the documents — and ask questions. Wang recognizes that there is a lot of paperwork involved in finalizing the purchase of a home but encourages buyers to read through it. “Review the documents with your lawyer and raise any questions as early as possible — your lawyer will be happy to explain everything.” Even questions that may seem basic are important to ask so that you’re going into home ownership with your eyes wide open.

• Understand the costs. As Wang explained, many homebuyers are surprised by closing costs and sometimes have to scramble for final expenses. He encourages buyers to ask their real estate agent, their lender and their lawyer to run through the costs involved to have the full picture.

• Ask about rebates. If you’re a first-time homebuyer, you may qualify for the first-time buyer rebate. If you’re buying a new home from a builder, you may qualify for the HST rebate. These rebates can add up, so it’s worth having a conversation with your lawyer about what might be available to you.

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