We have a number of clients closing on home purchases over the next few weeks and as such we’ve been having lots of conversations about closing day.
Closing day is that wonderful day where all of the hard work in finding your new home finally comes to fruition. You’ve seen lots of places with your trusty Realtor (like a dog, but with access to lockboxes), discussed neighbourhoods, transit, commute times, schools, renovations, financing, property tax, land transfer taxes, pricing and many other aspects of buying a home.
Once the property is purchased firm, the financing set in place, insurance arranged and the movers booked, time flies forward until closing day. Sooner than you think possible, closing day is upon us. With it comes some things that are lovely, some that are necessary, and some that can throw you for a loop.
Without further ado, here are three surprises about closing day that you should be prepared to experience!
Surprise #1 – Don’t count on getting in before 6 p.m.
The first page of the Agreement of Purchase sale has a section at the bottom for the completion date to be agreed upon between the buyer and seller. This is the closing day when the new owner actually gets the keys to the property and it is officially their new home. As part of the wording in the agreement, it says in the boilerplate wording (the stuff that we don’t change) that the agreement shall be completed no later than 6:00 p.m. on the date agreed upon.
That’s 6:00 P.M. Not first thing in the morning, not noon and not even mid-afternoon.
You’ve probably heard horror stories about buyers hiring movers to deliver their prized possessions to their new home in the morning or early afternoon of the day of closing. Unless everything went extremely smoothly with the lawyers and the lenders, such buyers often end up paying their movers to sit around and wait until the transaction closes.
In our experience, the vast majority of real estate purchases close mid-afternoon. Anytime before 4 p.m. is a sign you hired a good lawyer and everything was handled smoothly, both in advance of the closing day and on the day itself.
The exact closing time is a function of when the lawyers on both sides have received the necessary funds, done their transfers and ensured that the deal is actually done. Until then, the purchaser’s lawyer can’t release the keys and you can’t get into your new home.
Ask any lawyer and they will tell you that closing day for them is mostly about waiting around, followed by a burst of urgent action. At a bare minimum there are two lawyers involved in the transfer of title and there are almost always one or more lenders. If the seller has multiple lenders on title (such as when they have secondary mortgages in place), then those lenders also have to be involved in the process.
If any party to the transaction is slow in moving their part forward, the completion of the transfer is delayed. While that is sometimes a matter of minutes, it can just as likely delay the whole thing by a few hours. If the delays are significant, it may force the closing of the property to the next business day. This happens more often than you might think, as many lenders close officially at 5 PM. As such, always avoid closing on a Friday if possible, as that would push the actual closing to the next business day of Monday. If anyone suggests you close on the Friday of a long weekend, you might consider cordially telling them to take a long walk off a slow pier.
Surprise #2 – The term “Clean and broom swept” is a relative term.
In every deal that we do, we include a clause that says the Seller agrees to leave the premises, including the floors, in a clean and broom swept condition. This wording is quite typical and is generally understood to mean that the home will have all of the seller’s stuff out of it and that the dust, fuzz, scraps of paper, leaves, dog treats, uncooked spaghetti noodles, plastic grocery bags and other assorted debris still there will have been cleaned up and taken away.
Some sellers and their agents take it a step further and hire a cleaner to come in to make sure the home shows its best for the new buyers. We have done this on a number of occasions for seller clients when the stress of moving and the time crunch meant that it wasn’t as clean as they would have liked.
Our philosophy is that the buying and selling of real estate should be a win-win proposition, where neither party ends up with a bad taste in their mouth. Nothing sours a closing day like arriving in the lovely new (to you) home you are so pleased to have bought and find it looking like a frat party gone wrong.
As such, we advise buyer clients to expect the home to be in a reasonably clean state, but not likely pristine. As part of our process, whenever possible we visit homes with our buyer clients a day or two before the closing date to check to make sure all the appliances work and to note any issues that might cause problems on the closing day. If the sellers haven’t started packing or there is garbage everywhere, we would place a call to the listing agent to remind them of their obligations and to discuss a hold back with the lawyers to make sure it actually happens.
Surprise #3 – When you take lipstick off a pig, the pig doesn’t look as pretty.
The expression “like putting lipstick on a pig” is one that we encounter surprisingly often in our work. It is usually used in reference to attempts to make an unattractive house, or a feature of a house, look better by doing a cosmetic fix. New drapes concealing old, cracked windowsills or shiny new fixtures in a dated bathroom are prime examples.
One unpleasant surprise that can occur on closing day is related to this aspect of how real estate transactions take place. Put simply, the house that we see on closing date often doesn’t look as good as the house that we saw when we bought it. If the agent has done their job well, prior to listing the home for sale, the sellers have done their best to spruce up, stage and declutter the home. Imperfections have been covered or addressed – sometimes in in a temporary fashion – and the home on the market is showing its best version of itself.
When you arrive on closing day, this pretty little pig is gone. In its place is the morning-after version of the home, which may include numerous holes in drywall from a failed attempt to hang a flat screen TV, cracked vent covers that were hidden behind a couch, and a stained countertop from where the coffee maker used to sit. Such imperfections mostly fall under the heading of visible defects, which means that if the buyer and their agent didn’t notice and address them (either before agreeing to waive a home inspection or include the cost in their negotiating) then the seller aren’t under any obligation to fix them.
It’s true that some sellers do their best to hide imperfections they don’t want to have to fix, but the majority of the time, sellers either don’t know or have completely forgotten about these aspects of their home. A scratch on the floor that happened when the father-in-law moved back his dining room chair without standing up may have been covered up under a rug for the past 10 years. The sellers weren’t trying to hide it, they just hadn’t thought of it in years. Similarly, some imperfections are genuinely not known by the sellers. If a new buyer replaces a washer and dryer with a newer model, they may discover that the old model had a minor leak at some point in the past. The sellers may have never noticed the issue with the drywall as a result of the leak, because they never moved the washer and dryer from that closet.
While we do our best to prevent any unpleasant surprises, we also advise our clients to remember that no house is perfect and to expect that they will uncover a few imperfections as they get to know the home. In most cases, once you are moved in and your furniture is in place, there are only minor fixes needed to get the house looking great again.
We hope you’ve found this list of surprises on closing day helpful. In many cases, it’s about adjusting your expectations and not setting plans in motion that will be derailed as a result of you not knowing how things work on the big day.
If you’re looking to buy or sell and you love the idea of avoiding unpleasant surprises, then you should work with agents who know the details of how real estate transactions work. Get in touch with us to discuss next steps!
