After weeks or even months of searching for a property, negotiating terms, arranging financing, and completing inspections, closing day has finally arrived. For many buyers and sellers, however, there is still some uncertainty about what actually happens on the day of closing.
Although most of the legal work takes place behind the scenes, closing day is a carefully coordinated process involving lawyers, lenders, real estate agents, and the parties to the transaction. Understanding what happens can help reduce stress and ensure a smoother transition.
Preparing for Closing
In the days leading up to closing, your real estate lawyer will complete several important tasks to prepare the transaction for completion. This includes reviewing the Agreement of Purchase and Sale, conducting title searches, reviewing mortgage instructions from the lender, preparing closing documents, and calculating adjustments for items such as property taxes, condominium fees, and utilities.
Buyers will typically meet with their lawyer before closing to sign mortgage and transfer documents and provide the balance of funds required to complete the purchase. Sellers may also be required to sign documents relating to the transfer of ownership and mortgage payout arrangements.
What Happens on Closing Day?
On closing day, the buyer’s lawyer and seller’s lawyer work together to complete the transaction electronically through Ontario’s land registration system.
The buyer’s lawyer first confirms that all closing requirements have been satisfied and that mortgage funds have been received from the lender. Once everything is in order, the purchase funds are transferred to the seller’s lawyer, and the necessary registration documents are submitted electronically.
At the same time, the seller’s lawyer reviews the closing documents, confirms receipt of funds, and prepares to authorize the release of the property to the buyer.
The Transfer of Ownership
One of the most significant moments in the transaction occurs when title to the property is transferred.
Once the transfer document has been registered on title, legal ownership officially passes from the seller to the buyer. The buyer’s lawyer receives confirmation of registration, confirming that the buyer is now the registered owner of the property.
Unlike many people expect, this process is usually completed entirely electronically, and neither the buyer nor the seller is typically required to attend any in-person meeting on closing day.
Receiving the Keys
A common misconception is that buyers will receive their keys first thing in the morning. In reality, keys are generally released only after the seller’s lawyer has received the purchase funds, the transfer of title has been successfully registered, and authorization has been given to release possession of the property.
As a result, buyers often receive their keys later in the afternoon. For this reason, it is generally advisable to avoid scheduling movers too early in the day, as unexpected delays can occasionally arise.
What Happens to the Seller’s Mortgage?
If there is an existing mortgage registered against the property, the seller’s lawyer will use a portion of the sale proceeds to pay out the outstanding balance. The lawyer will also take the necessary steps to arrange for the discharge of the mortgage from title following closing.
Any other financial encumbrances that must be removed from title will similarly be addressed as part of the closing process.
Potential Closing Delays
While most real estate transactions close without issue, delays can occasionally occur. Mortgage funding delays, errors in closing documents, title issues, banking delays, or technical registration problems can all affect the timing of a closing.
In many cases, lawyers are able to resolve these issues on the same day. However, delays may impact when funds are released or when buyers are able to obtain possession of the property.
After the Transaction Closes
Once the transaction is complete, the buyer receives confirmation that they are the registered owner of the property and can take possession of the home. Buyers can then begin transferring utilities, updating their address, and making mortgage payments according to their lender’s schedule.
For sellers, the closing process concludes with the receipt of the net sale proceeds after any outstanding mortgages, commissions, and closing adjustments have been accounted for. Sellers can then finalize their move and complete any remaining utility transfers.
The Importance of a Real Estate Lawyer
Although much of the work involved in a real estate transaction happens behind the scenes, your lawyer plays a critical role throughout the process. From conducting title searches and reviewing documents to handling funds and registering ownership, your lawyer helps ensure that the transaction proceeds smoothly and that your interests are protected.
An experienced real estate lawyer can identify potential issues before they become problems and guide you through each stage of the transaction with confidence.
Final Thoughts
Closing day marks the final step in the home buying and selling process. While the legal and financial aspects of a real estate transaction can seem complex, most closings are completed efficiently through the coordinated efforts of lawyers, lenders, real estate agents, and other professionals involved in the transaction.
By understanding what happens on closing day, buyers and sellers can feel more prepared and approach the process with greater confidence as they complete one of the most significant financial transactions of their lives.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
2 St Clair Ave West
