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If you are buying a new home and selling your existing home, you will be faced with the decision of whether to schedule the closings on the same day, or one before the other. While there are certain advantages to closing your purchase and sale on the same day, there are also drawbacks and risks that many homebuyers/sellers are not aware of.   The biggest risk to buying and selling on the same day is that the buyer of the home you are selling isn’t able or refuses to complete the purchase, thereby leaving you short of the funds you require to close your own purchase. This can happen for a number of different reasons – e.g. mortgage funding delays, significant defects of title or property, lack of funds from another home sale.   Imagine a scenario where there are three properties being bought and sold that day. Buyer A is purchasing house A from Seller A; Seller A is purchasing house B from Seller B; and Seller B is purchasing House C from Seller C. If Buyer A doesn’t have mortgage funds on the day of closing, and cannot close his purchase, and if each of the sellers depends on the proceeds of the sale of their respective properties to close their purchases, then no one will complete their deals that day. This type of chain reaction scenario is one that many buyers do not consider when weighing the risks of scheduling their closings on the same day.   What are the other options? If you schedule your sale to close before your purchase, then that would make it less likely that you would be short the sale proceeds for your purchase closing. However, you would then need to find interim accommodations between the sale of your existing home and the purchase of your new home.   Another option may be bridge financing. This is short term financing that is offered by many banks in order to allow homebuyers to complete the purchase of their new home before completing the sale of their existing home. When the sale of your existing home is completed, then part of the sale proceeds is paid directly by your lawyer to the lender to repay the loan with interest. This option allows you the added benefit of being able to move into your new home over the course of the bridge period, rather than on the same day of closing. For many homebuyers, this is an attractive option.

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Toronto, ON M4V 1L5
Canada

Phone: (416) 863-0125

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