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The Process of Closing and Closing Costs

The Closing Process

Congratulations! You are now a proud owner of a new home.  Well, almost.

After selecting a house, negotiating price, dates, etc. you submit a deposit, and go through the process of removing the subjects.  The subject removal and closing process and legal aspects and they must be done carefully.  In other words, you have moved from the viewing, deciding and emotional stage to the legal, paperwork and paying phase.

First of all, there are many steps in the subject removal process but some of the more common ones are

  • Approve the disclosure of the seller   The seller or his or her agent has to disclose the obvious problems or flaws with the house for you to decide if you are ready to take on the risks.  For instance, the garage may have been converted into a living area which may be a violation of the locality’s housing code.    
  • Mortgage and Subject to Financing   Please visit our mortgage 101 page to learn more about the pre-approval and mortgage process.  It’s important to have secured bank financial prior to removing the subject.  As a caution the pre-approval is not an official approval.   You must submit the complete application and await formal approval before removing this subject
  • Home inspections    This is not a regulatory requirement but it is in your best interest to do so.  Adverse results in the inspection will give you a chance to back out or negotiate for a lower cost with the seller.  Inspections should cover major or minor repairs needed, environmental hazards and pests. An investment in a good home inspector may save you significant costs later on  
  • Secure home insurance    Your lender will require you to secure an insurance coverage over the time that your house is mortgaged with them. Get quotations from several insurance providers so that you can negotiate for the best rate, and lower your closing costs.
  • Secure the title report and title insurance    For your own protection, ensure that the title of the home is not encumbered in any significant way.  Meaning, only the owner has the sole claim over the property and you know of all encumbrances on title.   On the other hand, the title insurance will shield you from legal issues that may arise in the future after the investigation/check on the title.    Your realtor and lawyer can help you


When does official “closing” on a property take place?

Officially, it is the point where the title of the property is transferred to the name of the buyer. It is also the time when the buyer mortgages the property to the lender.   Generally the down payment is kept safe in the realtors brokerage trust account until the official

For example, the buyer of the house will deposit the payment to a trust account until such time that as the subjects are removed, the deal is firm, and the mortgage is in place.   

Closing Costs on a mortgageThere are some standard costs that you should be aware of when purchasing a home.   You’ll want to put pen to paper to ensure that you have enough cash.   Some of the most common expenses are:

  • Down payment – this is the amount that you have decided to put down toward the principal.  (the amount you  submitted into the realtors’ trust as a deposit counts towards this
  • Legal fees – the lawyer does the work of conveyancing the property.   There will be legal fees for this.
  • Lender fees – often the bank will charge mortgage application fees and appraisal fees
  • Property Purchase Tax – purchasing property in British Columbia involves paying a purchase tax.  You can calculate that amount using the Property Purchase Tax Calculator
  • Adjustments – the lawyer will calculate a Statement of Adjustments.   This includes amounts that go in either the debit or credit column depending on who paid it and when.  For example, the property tax, may have been paid in advance.

 

Your realtor will guide you through the whole process.  The closing of a property purchase is not as simple as paying the closing costs. In entails a good understanding of the property transfer process and legal principles that are usually within the turf of a lawyer.

 

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