Congratulations on the sale of your home!
The information provided below is not intended to be legal advice but rather to provide answers to a number of questions that are commonly asked. If you have others, please call or e-mail me!lizmoras@gmail.com
These are terms that can be confusing..........when in the midst of a transaction, clients are often stressed with many things on their mind. These are common questions that sellers are sometimes afraid to ask or can’t verbalize in ’real estate -ease’ terms.
What is the Contract of Purchase & Sale and How Can it be Amended?
What are Representations and Warranties?
Completion Date
Adjustment Date
Possession Date
What Documents Should You Provide to Us?
Use of Sale Proceeds to Clear Title
When Should You Stop Payments on Your Mortgage?
How is Your Mortgage Discharged?
Municipal Taxes
How is the Real Estate Commission Paid?
When Can You Pick Up the Balance of Your Money?
What About Utilities?
When Should You Cancel Your Insurance?
How to Decide Whether an Item May be Removed from the Property
What if the Property is Damaged Prior to Closing?
Should You Give Your Keys to the Purchaser?
What Time Must You Move Out?
What Documentation Will You Receive After the Closing?
Purchase of a New Home
Any Questions?
What is The Contract of Purchase and Sale and How Can It be Amended?
The Contract of Purchase and Sale (which we will refer to throughout as the “Contract”), formerly called an Interim Agreement, is the legally binding Contract which should set out in written form all the terms of the transaction. All warranties, representations, inclusions and exclusions should be fully recorded. Amendments can be achieved by written agreement (usually prepared by the Real Estate Agent on an amendment or addendum form) or by an exchange of letters between lawyers.
What are Representations and Warranties?
Every Contract contains some statements by the Vendor that certain circumstances exist at the time of signing of the Contract. A common example is the “warranty” that a home has no urea formaldehyde foam insulation or a “representation” that a septic tank is in good working order. If it should turn out that a statement of this nature was not true when it was made then the Vendor could be liable to the Purchaser for the cost of correcting the situation. Liability could arise even if the problem is discovered after closing. However, liability does not arise if the problem first occurred after closing, provided the existence of same was not hidden by the Vendor.
Completion Date
This is the date legal title passes. It need not be the 1st, 15th or 30th of the month, it can be any day except the weekend or a statutory holiday. The completion date is also commonly referred to as the closing date and we will be using these two phrases interchangeably.
Adjustment Date This is the date for determining the adjustment as between the Vendor and Purchaser of items such as municipal property taxes and utilities. It usually is the same date as the possession date.
Possession Date
The date on which the Purchaser is entitled to have possession of the property is called the possession date. It can be, but need not be, the same date as the completion date.
What Documents Should You Provide to Us?
Generally speaking we need the following:
a) Contract and all amendments;
b) Site Survey Certificate, if available.
Use of Sale Proceeds to Clear Title
The current law in BC specifies that if you intend to use the sale proceeds to pay off your outstanding mortgages this must be included in the Contract otherwise you will have to obtain discharges prior to completion using your own money.
When Should You Stop Payments on Your Mortgage?
Remember that regular mortgage payments are for interest that has already accrued.
It follows that all regular payments due prior to the closing date should be made. If you are on an automatic debit or pre-authorized chequing plan, the lender should stop drawing funds just prior to closing. It is a good idea to make sure that this actually happens. We will obtain and review with you a mortgage payout statement which will detail the date the last payment was made, prepayment penalties and discharge fees. In calculating the amount of money required to pay out the mortgage you should be aware of prepayment penalties and discharge fees which apply to your mortgage. If you have any questions about this you should call the financial institution which holds your mortgage.
How is Your Mortgage Discharged?
If the Contract permits, the Lawyer/Notary will set aside from the proceeds of your sale sufficient funds to pay any existing mortgages and will arrange to have the funds paid to the mortgage lender. They will also prepare and deliver to them a discharge of mortgage. They will have undertaken on your behalf to clear title for the Purchaser. It usually takes a number of weeks until we actually receive the discharges duly executed by the lender for registration. When received, they will register them in the Land Titles Office on your behalf. The cost of registration will have been retained by them from the proceeds of the sale.
Municipal Taxes
You are responsible to pay that portion of the municipal property taxes which relates to the period up to the adjustment date. Your notary/lawyer will adjust for the taxes between the Purchaser and the Vendor in the closing documents.
How is the Real Estate Commission Paid?
The notary/lawyer will set aside a portion of the proceeds of your sale to pay the commissions due to the Real Estate Agent and make all arrangements to send the funds to the realtor on closing.
When Can You Pick Up The Balance of Your Money?
It is usually the goal to have the balance of your funds available to you on the day of closing. Notaries and Lawyers do their best to pay out any mortgages to be discharged on that day in order to minimize any further interest charges to you. Unfortunately, this cannot always be accomplished as they are dependent on the receipt of funds from the Purchaser’s lawyer. They endeavor in every case to provide you with the funds as soon as possible on closing day.
What About Utilities?
You should make arrangements in advance to terminate your billing with all utilities such as hydro, gas, telephone and cable TV. Your forwarding address should be provided to the utility company so that the final bill may be sent to you. These final bills are your responsibility and should be paid promptly.
When Should You Cancel Your Insurance?
The cancellation of house insurance is your responsibility. The Contract will specify the date upon which the Purchaser is to assume all risk. Make sure the coverage is maintained until the end of the day following the completion date to ensure that your insurance remains in place in the event registration is delayed.
If you are not transferring coverage to a new property, you may be entitled to a partial refund. Also, ensure coverage is maintained on contents if the possession date follows the completion date.
How to Decide Whether An Item May Be Removed From The Property
Most Contracts contain specific lists of items that may be removed or must remain. Generally speaking, the basic structure of the house and anything which is so firmly attached to or incorporated in it can be called a “fixture” and must remain with the property.
What If The Property Is Damaged Prior To Closing?
The Contract contains an implied obligation on the Vendor to repair any damage which occurred after the Contract was signed other than the usual wear and tear arising from normal living.
Should You Give Your Keys To The Purchaser?
The best advice I can offer is to give the keys to the Real Estate Agent and not to the Purchaser. The agent should be instructed to confirm the transaction has been completed prior to turning the keys over to the Purchaser. If there should be any delay or problem in the completion of the transaction, we like to have possession of the keys in independent hands. We want to make sure that your interests are protected before the Purchaser is allowed to take possession of the property.
What Time Must You Move Out?
Most Contracts provide a time on the possession date at which possession is to be given. These matters should be clarified at the time of signing the Contract.
What Documentation Will You Receive After Closing?
After closing you will be provided with a written summary of all the details of the transaction including the financial information.
While the financial gain on the sale of a principal residence presently qualifies for the “principal residence deduction” and is free of income tax, the sale of rental properties may create taxable income. Keep our reports so that you will have any easy reference when preparing your tax return.
Any Questions?
It is important to understand that the answers we have provided are general in nature. If you have any specific question relating to your particular circumstances or transaction, please do not hesitate to contact me.
Email