Why You Need a Lawyer When You Buy or Sell a Home

Many people know that they need a Real Estate Lawyer when they buy or sell a home but are not sure what their lawyer does in the transaction. We hope to clarify this and help you make an informed decision when choosing a lawyer.

Buying a Home

When you buy a home the first step is usually to sign an Agreement of Purchase and Sale. This Agreement outlines each person’s rights and obligations and sets out what must happen before final closing. As such, it is generally a good idea to have the Agreement reviewed by a lawyer before you sign the Agreement. This will help prevent you from agreeing to something that is not in your interests. It is also especially important when buying a new home from a builder because of the numerous and lengthy provisions in the agreement, including those relating to extra charges and changes to the closing date. On the purchase of a resale home, however, the standard agreements are familiar to most agents and are drafted to balance the interests of the vendors and the purchasers. Most people will therefore not have this agreement reviewed by their lawyer before signing, although of course they may choose to do so.

When you bring your new home purchase Agreement to your lawyer, he/she will review it and advise you of provisions and how they will affect your purchase. He/She will also very often recommend changes to be incorporated into the agreement to better protect your interests. As stated earlier, new home agreements are lengthy and contain many provisions which may be contrary to your interest. This is your opportunity to know about what you are agreeing to and avoid agreeing to something you should avoid. We highly recommend that you have all builder’s agreements reviewed by a lawyer before signing a firm Agreement.

Once the agreement is finalized, whether it is for a resale home or for a builder, your lawyer’s job is to make sure that you obtain what you are entitled to in the agreement. Most essentially, this means making sure that you obtain good title to the property. That is, that title is free of liens, debts, mortgages, title defects, etc.. You do not want to buy someone else’s legal problems or debts when you buy your home. Your lawyer’s job is to make sure of this.

Title Insurance

One of the most comprehensive methods your lawyer can use to obtain an Assurance of Title is through Title Insurance. This is a policy of insurance guaranteeing your title to the property. This supplements the title search conducted by your lawyer but does not replace it. A full and proper search should always be conducted. The Title Insurance Policy, for example, provides protection against any fraud or forgery that has occurred on title and may contain a “Defense of Title” provision in case a claim against your title is made.

Aside from providing Assurance of Title, your lawyer will also contact the utility companies to have meters read and have only the new bills forwarded to you. If you are obtaining a mortgage, your lawyer will prepare all of the paperwork for the Bank and receive the mortgage money to be applied to your purchase. You will sign the mortgage documents at his/her office, provide the balance of down payment and Land Transfer Tax and, finally, pick up your keys at the his/her office.

Selling

When you sell your home, your lawyer again ensures that you only provide the buyer with what you have agreed to provide and, most importantly, makes sure that funds are properly received before releasing the deed to the buyer. Your lawyer will also pay any outstanding mortgages and Real Estate Commission, deliver the keys, and notify the utility companies of the closing.

If you are selling before you buy, your lawyer will ensure that the funds from your sale are applied to your purchase. Also, if you are buying before you sell, your lawyer will handle the bridge loan.

Closing Costs

Buying

Many people are concerned about their closing costs as they often hear of unwelcome surprises when they are asked to deliver funds to their lawyer’s officer. Again, we hope to clarify this.

Your closing costs generally consist of Land Transfer Tax and Registrations, Legal Fees/Costs, Disbursements, Title Insurance and HST.

Land Transfer Tax is payable by all purchasers of homes unless they are (a) first time buyers and (b) buying the property for their own personal use. If not, Land Transfer Tax is payable at a rate that increases with the price of the home. This will generally amount to 1-2% of the purchase price. Registrations where there is a mortgage will generally be $149.

Legal Fees/Costs – Many lawyers will charge a fee for their services, on top of which they will charge for disbursements (these are the costs incurred in obtaining the assurance of title such as title searches, execution searches, certificate, couriers, etc.) Title Insurance and H.S.T.. Unfortunately Fees, Disbursements and Title Insurance costs can vary significantly, which leaves purchasers uncertain about their closing costs. Our firm offers Fixed Closing Costs of $999.00 plus H.S.T for all fees and disbursements, plus Title Insurance for most purchases under $500,000.00. Please feel free to e-mail us at john@zinatikay.com with your purchase price and we will be able to provide you with a Fixed Closing Cost Quote.

Selling

The sale of a home is much the same except that there is no Land Transfer Tax to be paid and the disbursements are lower. We offer Fixed Closing Costs on Sales of $699.00 plus H.S.T. for all fees and disbursements. Again, please feel free to e-mail us at john@zinatikay.com for a written quote.

Adjustments

You should also be aware that there may be adjustments on closing for items such as property taxes whereby you will have to repay the seller for any prepaid taxes or condominium maintenance fees.