Buying a Home – FAQs
When you buy a home, it is likely the largest purchase that you will make in your lifetime. In those circumstances, the last thing that you need is to discover that there is a problem that will make the sale of your home or the refinancing of your home difficult in the future. This could happen in many ways and is one of our major responsibilities as your solicitors to make sure that you get good title to your property.
What is “Good Title”?
Good Title simply means that the house that you have purchased is yours and that there are no claims by any other parties against title or ownership to it. The title to your property has to be correctly described on the legal documents. These documents are registered and the title to your property must be searched.
What is a “Letter of Opinion”?
The traditional way in which we have always assured purchasers of Good Title is with an opinion on title. We provide our clients with a Letter of Opinion as to whether a purchaser has good and marketable title to the property. We only arrive at this opinion after completing a number of searches on your behalf. If we do discover problems, we will be in touch with you to discuss them.
If problems arise after closing and a buyer can prove that a lawyer did not do everything legally necessary to protect his rights, then the buyer can sue the lawyer for any losses and the lawyer is usually covered in Ontario by an insurance policy.
What is “Title Insurance”?
In recent years, the use of Title Insurance has been growing in Ontario. It is a second way of guaranteeing good title that is available to homebuyers. With title insurance, if a problem arises after closing, the purchaser will be covered for losses up to the amount of the policy. The amount of the policy will, normally, be equal to the purchase price of the home. Once the homeowner sells the property, the policy is no longer in effect.
What are the advantages of Title Insurance?
The advantages of Title Insurance include:
- If a problem does arise after closing, the purchaser will be able to recover losses through “no fault” insurance and the buyer does not have to prove that the lawyer was negligent.
- The purchaser is protected against mistakes by a third party, such as a municipal government giving incorrect information in one of their letters of reply to the lawyer’s initial letters
- If a survey is not available for a property and a purchaser does not wish to pay for such survey, then title insurance may save the costs of a surveyor, which routinely may run from $800.00 to $1,200.00.
- The cost of the Title Insurance policy will often be less than the cost of the disbursements which would normally be paid out as fewer searches are required by the title insurance company than would be required to give a title opinion.
- A major advantage of title insurance is the fact that the cost of the policy will often be far less than the cost of rectifying a particular problem that a title insurance policy would be prepared to insure against.
What are some things to consider?
Some things you may want to consider when purchasing a home are:
- Although a purchaser may be able to eliminate the requirement of the survey by a mortgage company, this does not change the fact that the survey could show existing problems with one of the neighbors such as the incorrect location of a fence.
- As with most insurance policies, the title insurance policy has exceptions and exclusions with its coverage.
What is the cost of Title Insurance?
Typically, the cost of a premium is approximately $150.00 for a condominium and $175.00 for a single-family home. This cost increases on properties having a value of over $500,000.00.
What if something goes wrong after closing?
When title insurance is used, if a problem is covered by the policy, a purchaser makes a claim directly to the insurance company. There is no need to hire another lawyer to prove the negligence of your own lawyer.
What is the role of my lawyer?
Your lawyer reviews the agreement of purchase and sale, prepares the legal documents such as the deed and mortgage, prepares affidavits and prepares all title insurance documents. Your lawyer also communicates directly with the title insurance company and purchases the insurance policy on your behalf.
Do I need a lawyer to complete my real estate transaction?
Yes, from a practical point of view. If you are purchasing a new home from a builder then your lawyer will want to discuss the terms of the Agreement of Purchase and Sale with you and provide a written quote as to your fees and disbursements. If certain disbursements are not clear on the face of the Agreement of Purchase and Sale, then a lawyer will request that the purchaser meet with the builders’ representative to clarify those amounts. These include items such as you new home warranty enrollment fee, water and hydro meters, the tree on the boulevard and other miscellaneous expenses that are typical in any new home contract. See the Article entitled “Buying a Home from a Builder”.
Your lawyer will also prepare all of the legal documents that are needed to be prepared in any home purchase.
As a purchaser, your main concern is getting what you have contracted for so that down the road there will be no problems. Most of what your lawyer does on your behalf ensures that you are getting good title on closing date.
Some of the things that a lawyer does during the purchase process are as follows:
- Check if there are arrears of utilities or municipal taxes;
- Search the title to your property;
- Search executions to see that there are no claims or judgments against the existing owners or the purchasers;
- Make sure that municipal by-laws have been complied with and there are no work orders outstanding; (this is often dealt with by title insurance);
- Inform the vendor’s lawyer of how you intend to take title;
- Send vendor’s lawyer a letter of requisitions detailing the items that need to be dealt with prior to the closing of the transaction;
- Review the statement of adjustments and other documents forwarded to your lawyer by the vendor’s solicitor;
- Discuss title insurance possibilities with you;
- Represent your bank in the transaction and in the preparation of all documents that will be required by the mortgage company;
- Oversee the preparation and execution of all of the necessary documents, including affidavits;
- Register all documents that are required;
- Discuss with you and calculate the land transfer tax;
- Arrange to have the keys to your home available to you;
- Provide you with either an opinion of title or a title insurance policy;
- Report to you with copies of your transfer, mortgage and other relevant documents.
This is far from a full list of all the items a lawyer does but it does give you an idea of the responsibilities that are carried out
Do I need a written quote?
No, you do not need a written quote. However, we would be pleased to provide you with such a written quote if you forward to us your agreement of purchase and sale. Usually these quotes are very accurate unless very unusual circumstances arise. With respect to purchases from a builder, it is often difficult to itemize the costs which the builder is passing on in an accurate fashion and it will be necessary for you to make inquiries with the builder’s representative so that the quote can be complete and you can budget accordingly.
Are there some matters that I need to be aware of concerning my legal transaction that you would feel are helpful?
Yes, there are. Here are some matters which we would draw to your attention:
Real Estate Agents – Whether you are buying or selling, you will probably be using a real estate agent. An exception lies in the case of where you are buying a new home and you will be dealing with a real estate agent or other representative of the builder. There has been a recent change in the law on real estate agents. In the past, real estate agents were all the agents of the vendor. However, it is now not unusual for real estate agents to be acting on behalf of the buyer and they are now under a legal obligation not to disclose confidential information that has been given to them by a purchaser. It is very important for you to remember that whether the agent is acting on behalf of the vendor or on behalf of you, as purchaser, the commission is still likely paid by the vendor.
- Survey – A survey is a document that shows what you own and gives you a clear picture of the extent of your title. The location of the buildings on the property will be shown on the survey and it shows the distance from your home to your lot lines and, in all likelihood, also shows all easements that are on the property. If your survey is up to date, it will show whether your neighbors have fences, driveways, or other encroachments that are partially located within the boundaries of your property.
- Title Insurance – For many of our clients, title insurance is the answer when a survey is not available or when there is some question with respect to the accuracy of the survey. Title insurance allows you to bypass the need for an up to date survey and the banks will accept title insurance rather than the copy of an up to date survey.
- Agreement of Purchase and Sale – The agreement of purchase and sale is a foundational document for any real estate transaction. It is a contract and has many legal ramifications. Once signed, it is the binding document on both parties. If you have an experienced real estate agent then he will have undoubtedly lead you through the terms of the agreement. If not, you certainly have the right to have your agreement of purchase and sale reviewed by a lawyer before you sign it. Remember, this is the foundational document and the agreement that you are reaching with the vendor is set out within the terms of your contract.
- Land Transfer Tax – A purchaser has to pay land transfer tax at the time that the transfer to the property is registered in the government offices. This is now done electronically. The amount of the tax is calculated on the basis of the purchase price.
- Moving – Once you have obtained the keys to your home you may now move into your home. We can never be assured as to when the keys will be available. However, the normal time for obtaining keys is certainly no later than 4:00 p.m. to 4:30 p.m. on the day of closing. This is a matter you need to discuss carefully with your lawyer, as you will have entered into a contract with your mover that depends on you obtaining possession of your home at a certain time. Keep this in mind and be very careful to discuss this fully with both your mover and your lawyer.
- Selling your home – In the sale of your home, there are also a great number of matters that need to be dealt with by your lawyer. Again, our law firm will provide you with a written quote of fees and disbursements, which will be very accurate.
Some of the responsibilities which the lawyer has are as follows:
- Review the agreement of purchase and sale and open a file;
- Prepare draft documentation including a draft transfer;
- Prepare statement of adjustment for review by the purchasers solicitor (a statement of adjustments shows the exact amount that will be required on closing and adjust for items such as taxes);
- Reply to the letter of requisitions from the purchaser’s lawyer and review any potential problems that could effect the closing;
- Prepare the mortgage and complete all the communications with the mortgage company;
- Prepare any register and discharges of mortgage;
- Oversee the entire real estate transaction including all work carried out by the law clerk;
- Complete the registration of all documents on the day of closing;
- Provide or arrange delivery of keys to your new home;
- Report to you.