Welcome
to The Legal Corner!
By
Terry Pochmurski
A Purchaser's
Perspective
Springtime is traditionally a busy time in the residential real
estate business. The school year is coming to an end, and moving
then is less of a disruption to children. The weather can only get
better so the timetable for building new homes, barring any strikes,
is relatively short and predictable. But what is involved in the
purchase of a house, whether it is new or a resale? In this article,
I will briefly describe what needs to be done from before moving
day if you are planning on purchasing a house.
First of all, whether a purchase is buying a new home or a resale,
it is certain that an Agreement of Purchase and Sale will be involved.
You should have the Agreement reviewed by your lawyer before signing
it or, at the least, you should make the Agreement conditional upon
acceptance of the terms by your lawyer. This is extremely important
if you are buying a new home, less important if you are buying a
resale. in the latter case, and where real estate agents are involved,
a standard real estate contract is often used which is not really
detrimental to either side. If you have not already arranged for
the financing of the purchase and you require a mortgage, you should
get your mortgage in place.
Once the Agreement of Purchase and Sale has been signed, you should
retain the services of a lawyer, if you have not done so already.
The reason for this is that it is the lawyer's job to ensure that
you have good title to the property that you are buying. The lawyer
will make sure that there is nothing on title to take priority over
or affect your rights in the property. There may be circumstances
where your title may be subject to some other party's right or interest,
but your lawyer will advise you if this situation arises and, if
it is a detriment to your title, you will usually be able to walk
away from the deal. In practical terms, your lawyer will, among
other things, make sure that all taxes and utilities have been paid
so that you don't end up facing a claim for the previous owner's
failure to pay. Your lawyer will make sure that you are getting
the property that you are supposed to be getting and, if you are
getting a mortgage, will also usually prepare the mortgage documentation
on behalf of the bank lending you the money.
Just a suggestion - if the Agreement provides for an opportunity
to inspect the house before the date of closing, take it! You want
to have some assurance that the property is in the same condition
as it was when you first signed the Agreement.
Before closing, you do need to obtain insurance coverage for your
house. Your lawyer will generally require evidence from your insurer
of insurance coverage, especially where your lawyer is also acting
for the mortgagee bank. This is not a difficult procedure and any
experienced insurer will be able to provide you with appropriate
coverage in a very short time period.
Usually no more than a few days before closing, you will have to
go to your lawyer's office to sign all of the necessary documents
to complete the transaction. Most purchasers only sign one document
that is actually registered on title (the Mortgage), but the other
documents that are signed provide protection to both the vendor
and the bank that is lending you the money. To the bank, you sign
a direction authorizing the bank to give the mortgage proceeds to
your lawyer so that he can then use that money to pay for the house.
You also sign an acknowledgement that you have received and reviewed
the terms and conditions of the mortgage (which for convenience's
sake are not registered along with the mortgage but instead are
included in the mortgage only by reference). Finally, you will sign
a declaration that the mortgage proceeds are not being used to finance
construction or improvements on the property. Without this declaration,
the bank's interest in the property may be subject to claims by
construction companies who do work on the property around the time
the mortgage monies are received by you. To the vendor, you give
a direction authorizing how title to the property is to be made
out.
Your lawyer should review with you at this time the Statement of
Adjustments, which is a table showing the credits to you and to
the Vendor, and showing ultimately, the amount of money that is
required to be paid by you to purchase the house on the date of
closing. This is important because the purchase price of the house
is never what you actually end up paying on the date of closing.
Adjustments have to be made for property taxes that have been either
overpaid or underpaid. Adjustments have to be made for water and
gas accounts that have been either overpaid or underpaid. Sometimes,
tenants are involved and an adjustment is required for rent either
received or owing. You will be required to bring in the balance
of the funds, after deducting the mortgage proceeds, required to
close the transaction.
On the date of closing, you will pick up the key from wherever it
was arranged that it would be available, and you can move in. Next
article I will examine the transaction from the vendor's perspective.
As always, this article is for informational purposes only. Please
do not rely solely on this for legal advice.
Terry
Pochmurski, B.A., LL.B.
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