Monday, 30 April 2012

Buying and Selling on the same day-Beware

In this week's blog, we are going to discuss an issue facing many homeowners when purchasing a residential property.

As is usually the case (for people who are not first-time home buyers) you have to sell your existing home in order to have the funds needed to purchase the new property. Time and time again, I see clients arranging for the closing of both their existing home and their new home on the same day. 

The difficulty with closing both transactions on the same day is one of timing. Both deals must be completed by 5 PM on the closing date and there is no specific time set for the closing of either deal. If the sale of your home takes place late in the day, this makes the possibility of completing the purchase of the new property by 5 pm unlikely. This is due to the logistics involved in closing a real estate transaction. Let me shed some light on the subject for you.

Once the sale proceeds arrive in my office and we complete the sale transaction, the funds need to be deposited into the trust account, cheques need to be certified and delivered to the seller's lawyer. If that office is quite a distance away from mine then it is unclear precisely when the funds will arrive at the other law firm, even if I send it on a rush basis. Sometimes, the seller’s lawyers will allow the funds to be deposited directly into their bank account (to save the time of a courier) but what if their bank closes before the deal is ready to close? Many banks still close at 4 pm.

If the purchase transaction doesn’t close in time, what is the client to do? For the moment, they are homeless. Sometimes, I am able to negotiate that my client be given possession of the new property (notwithstanding that the deal hasn't formally closed) but this is a rarity. The client is then left to find themselves accommodations for the night. This frequently involves staying in a hotel, meals in restaurants and additional storage charges by the moving company as the client's personal effects and furniture need to be stored overnight. They may even have to buy a change of clothes and toiletries because all of their belongings are packed away in the moving truck!

To avoid this situation, if possible, arrange for the closing date for the purchase transaction to take place a day or two before the closing of the sale transaction and obtain bridge financing for the down payment, land transfer tax and closing costs. In my experience, clients who use this strategy are usually able to complete the purchase of the new home relatively early in the day. This also reduces their moving costs as the movers are not sitting around all day waiting for the deal to close, accumulating hourly moving charges. Depending on your lender, the bridge financing costs can be minor in comparison to the stress and aggravation of waiting all day to take possession of your new home.

So heed a piece of simple device: When you are arranging for closing dates, do not fall into the trap of buying your new home and selling your existing home on the same day. It will likely save you hundreds of dollars in moving charges and save you a lot of aggravation and stress.

Monday, 23 April 2012

Buying a House with Appliances? Beware

An issue in house closings that has come up with increasing frequency is the issue of the purchase of appliances that are included in the purchase price.

Usually, a resale property will typically include existing appliances and most buyers never give much thought to the issue. Sometimes, following the closing, the buyer arrives at their newly purchased property to find that the appliances they believed would be included in the purchase price have been substituted with different appliances, usually older models. What do they do now? Usually, the first call they make is to their lawyer. The agreement will typically state that the existing appliances are included in the purchase price. The difficulty is that frequently, there is no documentary evidence as to what exact appliances were included in the price of the home. I recommend to my clients to take photographs of the appliances and obtain the serial numbers for each appliance and list those appliances in the agreement of purchase and sale. Without this evidence, any litigation which may ensue after closing boils down to which story the judge believes at a trial of the matter, the buyer's or the seller's.

As a result, I recommend that buyers ensure that when they have the agreement of purchase and sale prepared, to make sure that they take digital photographs of the appliances that were present when the offer was signed and to make sure that the photos are time stamped (details of the date and time of the photo) and readily available in order to prove without a shadow of a doubt as to what appliances were present when the offer was signed.

This small step can save you thousands of dollars and aggravation if the appliances you thought you were buying mysteriously disappear on the closing. As part of my service, I ensure that a separate schedule including the list of appliances and the serial numbers would form part of the agreement of purchase and sale.

Tune in to my blog next week when we discuss the trials and tribulations of  buying and selling a home on the same closing day.

Steven Klein