Closing or Completion Day Definition
The term closing day in real estate is also synonymous with completion day in BC. Simply, this can be seen as the “money day” for the buyers, as they will be required to bring the remaining funds calculated by the notary or lawyer to be able to close on the property and successfully transfer title. Ultimately, this means that the buyer will be signing and reviewing documents prepared by the notary or lawyer with regards to their mortgage loan, down payment, closing costs & purchase price, and the property title and ownership gets transferred from the seller to the new buyer.
This process is managed by the seller’s legal representative & buyer’s legal representative; however your mortgage broker, realtor, realtor’s brokerage for both parties will also actively be involved in providing the notary or lawyer with proper documentation and mortgage loan funds so that they can prepare the statement of adjustments to come up with the final closing numbers.
What Happens on Closing Day When Buying a House?
The process can vary from province to province, but in British Columbia the following are essentially the steps for what happens on closing day when buying a house:
- The buyer will sign a variety of documents prepared by their notary or lawyer relating to the mortgage loan, and the purchase of the home.
- The buyers are provided with the amount of funds required to “close” on the property, (such as remaining down payment & closing costs) and then provide a bank draft with the closing amount to the notary/lawyer to finalize their purchase.
- Upon confirming all funds have been received to successfully complete the purchase, the notary or lawyer will register the purchase with Land Title Office. The new home buyer will officially be listed as the owner of the property!
- The seller will receive any proceeds they earned from the sale, once their mortgage balance and closing costs (i.e. commission, lawyer fees) have been paid off.
It is sometimes the case that the notary or lawyer will have all of the documents and final numbers prepared before the closing day, usually 1-4 days prior. If this is the case, then the notary or lawyer may arrange with you to come in and sign the documents and provide the bank draft just before the closing date. This will ensure that the closing day goes smoothly and that title is transferred before end of day.
While most people understand they’ll be signing documents and handing over their final funds to close on the completion day, the rest of the process leading up to it after receiving a “firm” deal can be a bit of a mystery to the average home buyer.
Let’s take a closer look at how to prepare for the closing day when buying a house.
Preparing for Closing Day
Costs of Closing on a House
It is extremely important that you have a crystal clear understanding of exactly how much money you will need to pay in order to complete on closing day. When the closing day comes around, the notary will be preparing you with a statement of adjustments, which explains all of the total costs (down payment, closing costs, etc.) that are required in order for the purchase to be finalized.
This amount owing will not just include what is stated in the purchase agreement as the selling price, but also other payments and adjustments such as property transfer tax, legal fees, disbursements, maintenance fee & property tax adjustments, and more.
Make sure to have this discussion with your realtor and lawyer well in advance of closing to ensure that you have sufficient funds available.
Make Sure Your Down Payment Funds Are Ready
In the case that you are using funds from your RRSP to complete the purchase, make sure that you’ve informed your bank representative at least one month prior to closing on the house so that the funds will be available.
If you are wiring funds from out of country or receiving money from family as a gift, then you’ll want to discuss with your mortgage broker in advance as to how long that money may be required to sit in your account for the lender to consider it towards your down payment.
If you’re just in the starting period of purchasing, your mortgage broker should be able to provide you with a rough estimate for your closing costs as well so that you know how much you will have left over for your down payment.
Review Your Contract Again
Review your contract to ensure that you are aware of all of the included items that the seller should be leaving behind, as well as any additional terms that were agreed to for closing.
Is the microwave included? Are there any fixtures that are going to be removed? Your realtor should have reviewed this with you at the time that you wrote the contract, but refresh your memory before closing so that you can keep track of anything that may be missing when you move in.
Complete Your Final Walk Through
Your realtor should have added a term that you can go back to see the property prior to closing, as well as warranted all of the appliances to ensure that they will be working upon possession.
You’ll have to arrange with the seller for a pre-closing inspection of all the appliances, heating, plumbing, and electrical systems as close as possible to the closing date. Make sure that the seller has completed, or has scheduled to complete everything that they have promised will be given to you on closing.
Refer to your home inspection that you would have had done during subject removal and cross-reference with the current state of the home. If there has been any damage between contract and closing then you’ll want to negotiate any necessary repairs with the seller and let your lawyer/notary know.
Meet with your Lawyer typically 1-4 Days Before Closing
The lawyer will prepare a statement of adjustments outlining what has been paid, and what is owing on each side of the transaction.
It is normal to go in and sign the documents and hand in the bank draft BEFORE the official closing day, as the notary or lawyer will want to ensure that everything is in order for the title to transfer smoothly by end of the official closing day.
Many notaries and lawyers will work 9am-5pm, so make sure that you’re planning well in advance to take time off work to review the statement of adjustments for closing if necessary.
Try not to close during your lunch hour, as an hour might not be enough. Rather, take off a day or half-day, and schedule well in advance as a good notary/lawyer will get booked up fast. Do not leave this until last minute, and make sure that you come prepared with 2 pieces of government issued ID, your SIN card number, and the bank draft of funds to close.
Closing Problems that Cause Delays: What to Avoid
Avoid an End of Month or End of Week Closing
There are certainly things that can go wrong at completion, and the above information will help to avoid this. However, notaries and lawyers often see the following issues arise at completion:
- Not having the proper funds to complete
- Failing to complete a walk through & realizing there are issues with the home
- Lender pulling out because your financial situation has changed
If something goes wrong, you’ll want a day or two to resolve the problem. If you close on a Friday, then that means that you’ll have to wait until Monday to get the issue resolved as notaries and lenders are not open on the weekends.
Furthermore, an end of month close can be a busy time for a lot of notaries and lenders as they are popular this is because prepaid interest due at closing accumulates throughout the month. If a closing scheduled on the last day of the month is not completed that day, you will have increased closing costs, beginning at the start of the next month. but it can be avoided or reduced if the closing is near the end of the month.
Make Sure the Appraisal Has Been Satisfied
Make sure that you mortgage broker has satisfied the lender’s requirement for an appraisal well in advance of the closing date. If you have a long close, they may require an updated appraisal.
Ideally, the appraisal should occur within the 7 day subject removal period immediately after you have received an accepted offer so that you can guarantee that the bank agrees that the home is worth what you agreed to pay for it.
If the appraisal comes in low, you will be required to come up with the difference – which you will definitely want to know before the closing date.
Arrange For Home Insurance on the Property
In order to obtain mortgage financing the lender will most likely require you to have insurance on the property.
Arrange your home closing insurance coverage well in advance, as the insurance company will have a questionnaire with questions that you need to fill out in detail.
If you are purchasing an older detached home, make sure you ask questions about things like the wiring as outdated wiring may result in a much higher insurance premium.
If you are buying a strata property, you will have to look for their insurance as well as it will determine what your insurance will have to cover.
The insurance can take time, and you’ll likely need to have your realtor send a feature sheet to your broker or ask the seller a number of questions in order to close smoothly.
Moving in After Closing Day: Preparing for the Possession Day
Organize Your Move In Date
After completion has finalized, you are able to move on to the possession day and getting the keys to your new home! The time and date of possession ranges, but you will commonly have possession at 9AM or 12PM usually 1-3 days after completion.
To find out exactly what your move in date and time is, refer back to your original contract of purchase and sale, as it will have a specified possession date & time that you are supposed to get your keys.
Make sure that you are well aware of the time that you are entitled to receiving the keys, and arrange your movers well in advance as they book up quickly.
If you’re dealing with a strata property, you should give 2 weeks notice that you’ll be moving in to the building and also arrange for an elevator key to be given to you on your move in day.
A number of strata’s will have a restriction on the hours in which one can move in/move out of the building, so ensure that you are aware of the bylaws so you can be respectful of them.
You may want to consider moving in a few days after the possession day if possible, as it will give you time to clean, paint, and/or organize your new home before moving furniture and boxes in. Make sure you’ve considered the logistics of your move in advance.
Strategize Your Overlap
If you are selling your home and buying at the same time, dates will be a very important factor for you.
To avoid a rushed move, many sellers like to have their purchase complete before their sale so that they can transition in to their new home slowly before they have to leave their current one.
In this case, the bank will need to approve you with a bridge loan to complete your purchase prior to receiving the money from your sale. Given you have two firm offers on both your purchase and your sale, this is often something a bank may offer to you and you’ll only pay interest for the time that you bridge.
If you need to move out of your current home before completing on your purchase, ensure that you have a place to stay during the transition time. A storage facility rented on a short-term basis will also help to minimize some of the stress.
If you’re looking for a realtor to help you make sure that everything is straight forward from the beginning until the end, then give us a call at 604-765-0376. Prefer text? 604-319-0200 or email [email protected] to start a conversation. We’re here to make your home buying process seamless and smooth, plus it’s a FREE service!