Closing Process Explained

What Closing Day Means

Closing day is the date when ownership of the property officially transfers from the seller to the buyer. It is the date specified in your Agreement of Purchase and Sale, and it is the day your lawyer registers the title in your name, the purchase funds are transferred, and you receive the keys to your new home.

In Ontario, the closing process is handled entirely by lawyers. Your real estate lawyer manages the legal, financial, and administrative details so that the transfer happens smoothly. Hiring a competent real estate lawyer early in the process is essential.

Hiring a Real Estate Lawyer

You should engage a real estate lawyer as soon as your offer is accepted. Do not wait until a few days before closing. Your lawyer needs time to conduct a title search, review the agreement, coordinate with the seller's lawyer, prepare mortgage documents with your lender, and address any issues that arise.

Real estate lawyers in Ontario typically charge between $1,500 and $2,500 for a standard residential purchase, plus disbursements. These disbursements cover costs like title searches, registration fees, courier charges, and other out-of-pocket expenses. Ask for a detailed estimate of all fees upfront so there are no surprises.

When choosing a lawyer, look for someone who specializes in real estate law and has experience with transactions in your area. Ask your agent for recommendations. A good lawyer is responsive, thorough, and proactive about communicating with you throughout the process.

What Your Lawyer Does Before Closing

In the weeks leading up to closing, your lawyer handles a number of critical tasks:

• Title search: Confirms the seller has clear ownership of the property and that there are no liens, encumbrances, or other claims against the title
• Review of the Agreement of Purchase and Sale: Ensures all terms are accurate and enforceable
• Mortgage instructions: Coordinates with your lender to receive and prepare the mortgage documents
• Statement of adjustments: Calculates the final amount you owe, including adjustments for property taxes, utilities, and any other prepaid or outstanding amounts
• Title insurance: Arranges a title insurance policy that protects you and your lender against title defects, fraud, and certain survey issues
• Land transfer tax calculation: Confirms the amount of provincial (and municipal, if applicable) land transfer tax you owe and applies any rebates you qualify for

The Statement of Adjustments

The statement of adjustments is a detailed accounting of the final amount you owe on closing day. It starts with the purchase price and credits your deposit. It then adds or subtracts adjustments for items that have been prepaid or are owing.

For example, if the seller has prepaid property taxes for the full year but you are taking possession partway through, you will reimburse the seller for the portion covering the rest of the year. Similarly, if the seller has prepaid condo fees or utility bills, those amounts are adjusted so each party pays their fair share.

Your lawyer will send you the statement of adjustments before closing so you know exactly how much you need to provide. This amount, combined with your mortgage funds, must equal the full purchase price plus any closing costs.

Title Insurance

Title insurance is a one-time premium that protects you and your lender against problems with the property's title. This includes issues like fraud, forgery, encroachments, zoning violations, and errors in the public record. In Ontario, most lenders require title insurance as a condition of funding your mortgage.

The cost of title insurance is typically between $250 and $500 for a standard residential purchase. It replaces the need for an up-to-date survey, which can cost significantly more. Title insurance provides ongoing coverage for as long as you own the property.

Preparing for Closing Day

In the days leading up to closing, there are several things you need to arrange:

• Home insurance: Your lender requires proof of home insurance before they will release the mortgage funds. Arrange your policy well in advance and provide the details to your lawyer
• Utilities: Contact the local utility providers (hydro, gas, water) to set up accounts in your name starting on the closing date
• Final walkthrough: You have the right to inspect the property before closing to confirm it is in the agreed-upon condition. Schedule this with your agent, ideally the day before or the morning of closing
• Funds: Your lawyer will tell you the exact amount you need to provide by certified cheque or wire transfer. Have this ready in advance
• Identification: Bring government-issued photo ID to your meeting with your lawyer to sign the closing documents

What Happens on Closing Day

On closing day itself, the process is handled by the lawyers. Your lawyer receives the mortgage funds from your lender, combines them with your down payment and deposit, and transfers the total purchase amount to the seller's lawyer. The seller's lawyer confirms receipt, the title is registered in your name, and the keys are released.

In most cases, key pickup happens in the afternoon. The exact time depends on when the funds are confirmed and the title is registered. Your agent or lawyer will let you know when the keys are ready. Plan your moving logistics accordingly and do not expect to access the property first thing in the morning.

Once you have the keys, change the locks, test the major systems (heating, cooling, water), and take meter readings for your utility accounts. Welcome home.