A blog cannot deal with all aspects of a subject and is not intended to replace professional advice. It's purpose is to highlight information and identify areas of possible interest. Anyone wishing to discuss this blog or to make any comments or suggestions about this blog is invited to do so by either posting comments or emailing me directly.
September 15, 2011
Preparing for Possession Day: 24 Items to Know
Possession day in the sale or purchase of a home (also known as "Completion Day" in our real estate contracts) is a milestone for both the buyer and the seller. To make the it go smoothly, it's imperative that both the buyer and the seller are prepared.
Here are some of the items to deal with if you are the seller:
- Make sure you provide your real estate lawyer with the copies of the purchase contract and Real Property Report as soon as the contract is finalized. (It's usually handled by your full-service real estate agent, but check with the lawyer to be sure). The lawyer will access a copy of your property title and verify the mortgages and any other financial obligations registered therein and then request payout amounts from each. Your lawyer will also review your Real Property Report with you and determine if there are still outstanding issues that need to be dealt with prior to the property title transfer. Normally this process should have been started when you listed your home for sale, as sometimes there are issues that take weeks or months to deal with. Speak with your full-service real estate agent early on to get the process started.
- Notify all of your utility providers to take the utility meter reading on the day of closing. That way you will be only responsible for your share of the utilities. For the utilities without meters, like telephone and cable television, make sure you notify them so that your service can be disconnected. Also, find out what items need to be returned to them: leased or non-owned telephones, cable boxes, Internet modems, telephone modems.
- Make sure you do not cancel your home insurance policy until you have been given word from your lawyer's office that the deal has closed. Also, if you are moving out 10 or more days in advance of the closing date, contact your insurer to notify them that the home will be vacant and for them to determine if there are additional fees to be paid or procedures that are needed to be completed by you prior to departure. This way, you will still be covered in the unlikely event that something happens to the home up to possession date and the transfer of title to the new owners.
- Provide your lawyer with copies of any documents regarding pre-payments that you have made - condo fees, community association fees, property taxes. The lawyer will verify the amounts to determine a statement of adjustments for the buyer to pay from these.
- You will need to visit your lawyer's office a few days prior to the closing date in order to sign all the papers. If you are going to be out of town at that time, arrangements will have to be made for you to meet in advance or for you to meet with another lawyer while you are travelling to go through the documents at the appropriate time.
- If any of the parties on the title (the sellers) are a non-resident of Canada, they must obtain a certificate from the Canada Revenue Agency regarding any taxes payable, or the lawyers are required to withhold 25 percent of the purchase price until they do get it. This process is not generally very speedy and could take a few months to complete, so speak with your financial advisor and your real estate lawyer well in advance to start the paperwork. As a guide, a non-resident is someone who has not lived in Canada for at least 183 days in the year before the closing date. If you have any question as to whether or not this applies to you, ask!
- Review the purchase and sale contract once more to ensure you have left everything that was required in the contract - fridge, stove, washer, dryer, window coverings? Also, generally if an item was fastened to the house by a screw or nail, it belongs to the house and should go with it. Your full service real estate agent would have gone through this with you at the point of writing up the listing contract to know what to exclude from the listing and the eventual sales contract.
- Have everything cleaned out of the house prior to noon on possession day. It is your responsibility to ensure the home is clean and secure when you leave. Dispose of all rubbish. Do not leave paints or cleaning supplies unless it has been agreed to by the buyer to assume them. From experience, planning on moving out on possession day is usually a really bad idea.
- If you are on city garbage collection, the garbage and recycling bins belong to the home, so leave them in a secure place (like in the garage).
- Provide your real estate agent with one key to hand to the buyer, and leave all other door keys, mailbox keys, garage door opener and ceiling fan remote controls, and service manuals and warrantees for any appliances that go with the house in an obvious place (like in a kitchen drawer). If you have a remote mailbox, leave the buyer written instructions on where it is and how to access it. If you are selling a condominium, leave a note on how to access the garbage room or other facilities that may have access codes: that should come from the condo board, but that could take several days before they get the information that they'll need right away.
- Arrange to have your mail forwarded to your new address.
- After the buyer has taken possession, then notify your bank to cancel any pre-authorized payments or post-dated cheques: condo fees, utility withdrawals, mortgage payments, house insurance. Make sure you don't pay for anything after closing and check your statements for several months to be sure.
Here are some of the items to deal with if you are the buyer:
- Your full serve real estate agent should deliver your purchase contract to your real estate lawyer if you have provided them authorization to do so. You may need to verify if and when they will be doing this - otherwise you should deliver the documents to them right after you finalize the purchase agreement.
- Make sure the lawyer gets your contact information so that they can get hold of you when they need you. You should also make sure they know from whom to expect your mortgage funds. This way if they haven't heard soon enough, they can contact you and your lender immediately - before there is a problem.
- Schedule to meet with your full service real estate agent at the property at noon or shortly thereafter on possession day. You will wish to view the property shortly after possession to ensure all the items are in the home that should be and that the home is in substantially the same condition as when you signed the purchase and sale contract. Having your home inspection handy is also helpful since appliance serial numbers are usually recorded in it. If there are any issues, contact your lawyer immediately to help resolve them. It's important to note that neither your real estate agent nor your lawyer cannot give you access for any reason to the property until the seller and their lawyer provide them instructions to do so (usually when the mortgage funds have been paid to them by your lender).
- Do not make any significant purchases (furniture, cars, vacations), lay aways, or leases between when you get final mortgage approval for the purchase and when you take possession of your new home. Any issues that show up on your credit report, no matter how minor, could cause your lender to cancel their agreement to fund your mortgage. This can happen right up until the moment of possession. A word of caution, buy those appliances or new furniture on or after possession day.
- Arrange for your moving truck to arrive late in the day or preferably the next day. If you are moving into a condominium apartment, you will likely need to book your moving time with them in advance even if you are moving into a main floor apartment with its own outside access. Some buildings require that you provide them with a small deposit on the elevator key and they may also provide a security guard (to prevent unauthorized access to the building).
- Contact the utility providers to create accounts in your name and take meter readings on the day of closing / possession. This way you they'll be connected for when you move in and you'll only pay for your share of the utilities. If you're moving from out of province, you may need to provide a small security deposit for some providers. Do some research, combining (or packaging) your utilities to one supplier can sometimes save you a significant amount of money.
- As part of your utility calls, set up your telephone, Internet and cable television hookups. If they need to physically attend the property, then make it for late in day on the day of closing or preferably the next day.
- Arrange to have your mail forwarded to your new address.
- If you are buying a home with less than a 20 percent payment, then mortgage insurance is required. This insurance protects the bank in case you default on the loan. This amount is usually tacked onto the mortgage amount and financed, but could be included in your closing costs. Make sure that your lawyer gets the mortgage instructions that are the same terms that you have agreed to with your lender. You won't want to be scrambling at the last minute to get the additional funds just a few days before closing.
- Your lawyer will get a statement of adjustments from the seller's lawyer shortly before closing. This will include any amounts that were prepaid by the seller. These amounts, will be part of your closing costs. Along with legal fees and disbursements and the balance of your downpayment. At least 2 days before closing, you will need to provide your lawyer with these closing costs. The balance is payable by bank draft, money order or certified cheque.
- Arrange for insurance. Fire insurance is a requirement for all mortgaged properties for the full replacement value of the home and just makes sense for all properties. If you are buying a condominium, make sure to get a condominium owner's policy (and not a renter's policy). Arrange for the insurance early, as the lawyer will be looking for proof of coverage for the lender during your meeting with them.
- If there is more than one person taking title to the property, make sure that your lawyer understands how you wish to take the title. As tenants in common, and if you were to pass away you could transfer your interest in the property to your beneficiary. As joint tenants, your portion automatically transfer to the the other owners.
- Discuss the merits of title insurance with your lawyer. Title insurance will protect your property against survey issues and frauds while you own the property. It is very worthwhile by is not an acceptable alternative to a clear Real Property Report. Reviewing the Real Property Report and preparing title transfer documents are some of the significant tasks your real estate lawyer does on your behalf.
By being prepared, you will significantly ease the stresses of possession day and the day leading up to it.