From Accepted Offer to Keys: How a Home Purchase Closes in Ontario

Once a seller accepts your offer, you have a binding agreement of purchase and sale. The weeks between acceptance and closing are when most of the legal work happens, and when most avoidable problems arise. This guide walks through the usual steps for a resale home purchase in Ontario and what to watch for at each one.

Before you sign

The agreement governs everything that follows, so the best time to get advice is before you sign the offer. Your lawyer can review the closing date, the amount and timing of the deposit, the conditions, the chattels and fixtures included, and any clauses your agent has added. Changes are easy to make before the offer is accepted and difficult afterward.

Common conditions in a buyer's favour include:

• arranging satisfactory financing

• a satisfactory home inspection

• for a condominium, a satisfactory review of the status certificate by your lawyer

• the sale of your current home

An offer with no conditions is binding as soon as it is accepted. If you waive conditions to compete with other buyers, you take those risks on yourself.

Acceptance and the deposit

The agreement states when the deposit is due. Under the standard Ontario form, a deposit payable "upon acceptance" is due within 24 hours of acceptance, and it is usually held in trust by the listing brokerage until closing.

Paying the deposit late, or not at all, is a default, and it does not undo the agreement. Our earlier posts explain the consequences of failing to deliver a deposit and what happens if you do not pay it.

Satisfying or waiving conditions

Each condition has a deadline. If you want to proceed, you must give written notice by that deadline that the condition is waived or fulfilled, in the way the agreement requires. Under many standard conditions, if no notice is given in time, the agreement becomes null and void and the deposit is returned. Read the wording carefully, because not every condition works that way.

Do not waive a financing condition until you have a written mortgage commitment and understand its terms. A commitment that is still subject to an appraisal or further documents is not the same as approved financing.

Retaining your lawyer

Once the agreement is firm, send your lawyer the agreement with all amendments, waivers and notices, your agent's contact details, your mortgage commitment and lender details, and identification for each buyer. Lenders send their instructions directly to the lawyer, and on most residential purchases the same lawyer acts for both you and your lender.

You will also need to decide how to hold title. Two or more buyers usually take title as joint tenants, where the survivor takes the whole property, or as tenants in common, where each owner's share passes under that owner's will. The choice has estate and family law consequences and is worth discussing before closing.

Title search and requisitions

Your lawyer searches the title to the property and the execution index, and makes enquiries about realty taxes, utilities, building permits and work orders where appropriate. The agreement sets a requisition date, usually several days or weeks before closing, by which the buyer must raise objections to title. Objections not raised by that date may be lost, except those that go to the root of the seller's title.

Problems found at this stage are often resolved by the seller's lawyer before closing. An old mortgage that was paid but never discharged is a common example. Most buyers' lawyers also arrange title insurance, which covers a range of title, survey and fraud risks and is often required by the lender.

Mortgage and home insurance

Your lender needs a final mortgage commitment with its conditions satisfied, and proof of home insurance on the property effective on closing. Arrange insurance early. Lenders will not advance funds without it, and some properties, such as those with older wiring or an oil tank, can be harder to insure.

The statement of adjustments and your closing funds

Shortly before closing, the seller's lawyer prepares a statement of adjustments. It starts with the purchase price, credits the deposit, and adjusts items such as realty taxes the seller has prepaid or left unpaid for the year. Your lawyer reviews it and tells you the amount you must provide.

Your closing funds usually equal the purchase price, less the deposit and the net mortgage advance, adjusted up or down under the statement of adjustments, plus land transfer tax, legal fees, disbursements and title insurance. Funds are normally sent to your lawyer's trust account by wire transfer or certified funds at least a day before closing. Leave time for your bank's transfer limits.

Land transfer tax

Ontario charges land transfer tax on most purchases, and properties in the City of Toronto are subject to a second, municipal land transfer tax. First-time buyers may qualify for a refund of some or all of the tax. Your lawyer calculates the tax, completes the required statements as part of the electronic registration, and pays the tax from your closing funds.

The signing appointment

In the days before closing, you meet your lawyer, in person or by video conference, to sign the mortgage documents, the authorization for electronic registration and the declarations your lender and the land transfer tax rules require. Bring government identification and confirm in advance who must attend.

Closing day

On closing, the lawyers exchange documents and funds electronically, usually under a document registration agreement that sets out how the closing will be completed. Your lawyer receives the mortgage advance, sends the balance due to the seller's lawyer, and registers the transfer and your mortgage through Ontario's electronic land registration system. Once registration is complete, the seller's lawyer authorizes release of the keys, usually through the listing agent.

Most agreements make time of the essence, so a closing that cannot be completed on the scheduled date depends on the seller agreeing to an extension. If a financing or other problem arises, tell your lawyer at once. A buyer who fails to close can be liable for far more than the deposit, as the buyer in Singh and Kaur v. Feneich learned.

After closing

The seller's lawyer pays out the seller's mortgage from the sale proceeds and gives an undertaking on closing to have the discharge registered. Your lawyer follows up until it is. When a discharge is never registered, the problem can surface years later.

You will then receive a reporting letter with your registered transfer, the title insurance policy and a final accounting of your funds. Keep these with your important papers.

For sellers

Sellers follow a parallel path. The seller's lawyer obtains a payout statement from each lender, prepares the transfer and the statement of adjustments, answers the buyer's requisitions, and gives undertakings to discharge mortgages and pay any outstanding amounts. Sellers should leave the property in the condition the agreement requires, with the included chattels and fixtures in place, and give vacant possession unless the agreement says otherwise. A seller who is also buying should coordinate both closing dates with their lawyer, since bridge financing may be needed.

How we can help

We act for buyers and sellers on residential purchases, sales and refinances across Ontario, and our litigation practice handles transactions that fail to close. If you are about to make an offer, or have just had one accepted, contact us early so the agreement and the timeline work for you. Learn more about our Real Estate practice or contact us to arrange a consultation.

General information only, not legal advice. Every matter turns on its own facts.