The family home is the biggest financial investment for most people. Timing and structuring of the transaction are often driven by personal preferences rather than the understanding of certain intricacies surrounding the entire process. We closed hundreds of real estate transactions for our clients. Some transactions, however, do not always go as planned.
Many failures are usually not caused by one factor but rather by a chain of events. In his book Outliers, Malcolm Gladwell wrote about plane crashes, stating that “the typical accident involves seven consecutive human errors.” The same could be said about real estate closings that are usually a part of a larger chain of transactions.
Below is a list of some mistakes to avoid, as they may increase the likelihood that your next real estate transaction may not close as planned.
1. Never close on a Friday before a long weekend
Homeowners often specifically try to close on a Friday before a long weekend to allow for extra time during the move between homes. In our experience, however, around 5% of long weekend deals fail to close on time. A failure to close is often driven by a higher volume of transactions that put pressure on the lending institutions. The bank often does not release the funds until late afternoon, assuming all paperwork is in order. The funds would then need to travel from the lending institution to the buyer’s lawyer trust account, then to the vendor’s lawyer trust account before the transfer of title can be registered. All this needs to happen before the land registry office closes at precisely 5 pm. Any glitch in this chain of transfers could result in a closing delay until after a long weekend.
2. Never close on the last or the first day of the month
For the same reasons as above, never close on the first or the last day of the month. Around three to four times as many transactions close on these days as any other day of the month. This means that banks are much, much busier and the chances of something being delayed are much high.
3. Never buy and sell on the same day
The reason that most people try to buy and sell on the same day, is because they need the proceeds of the sale, in order to purchase their new home. However, most are unaware of how easy and inexpensive it is to obtain bridge financing. Most lenders are happy to advance the additional funds required to close, for a few days, bridging the time between the purchase and the sale of your homes. When you try to buy and sell on the same day, it often does not go according to plan and could create a lot more stress and aggravation for both parties. Let’s say you were planning to sell your home on a Friday before a long weekend and buy your new home the same day. The funds from the buyer, however, did not arrive before the land registration system has been shut down for the long weekend. This would cause a domino effect by thwarting the purchase of your new home as well. All of which will result in additional fees, costs and stress.
4. Do not forget to distinguish between fixtures and chattels
Receiving an offer on your home is exciting. But, do you know, what is included in the price? Would a
large antique mirror, a big screen TV or a utility shed be included or excluded from the sale price? The answer to this question lies in distinguishing these assets as fixtures or chattel. Fixtures are generally described as the property that is permanently attached to the land or building. All fixtures are included in the purchase price unless specifically excluded in the Agreement of Purchase and Sale (“APS”). A chattel, on the other hand, is a property that can be removed because its removal would not cause harm or damage to the land or building. Chattels are excluded from the purchase price unless specifically added to the APS. You should consider making your intentions clear in the APS if not sure under which category certain property may fall. Dealing with these matters in advance will help to avoid unpleasant surprises, additional costs, and extra fees. An experienced realtor will take you through what you want to be included or excluded.
5. Never include pets in the Agreement of Purchase and Sale
We once worked on a transaction where cute little bunny rabbits were included in the APS. Our client no longer wanted their pets, and the purchaser’s daughter fell in love with the idea of having bunnies. The bunnies, however, had a plan of their own. The escape tunnel was not discovered until the closing day. To make matters worse, all nearby pet stores were completely sold out of bunnies. Several more stressful hours later, the deal closed, and our client was none-the-worse for wear, but two important lessons were learned:
1. Bunnies don’t like fences;
2. Pets have no place in an APS.
You should consider dealing with any chattel, especially pets, outside of the APS to avoid aggravation and unnecessary disputes. We would be happy to speak with you prior to the start of the search for, or the listing of your home. If you need a realtor, we would be delighted to give you the name and contact details of a few exceptional realtors.
Contact Geoff Pollock & Associates when buying or selling real estate
We will be happy to discuss your specific situation and answer any questions about your upcoming real estate transaction. You can contact us via email or give us a call at 416-777-0088.