[Jennifer Park] Lessons Learned in Law and More

Practical Tips from a Practicing Real Estate Lawyer Min Ju Jennifer Park, Partner at Realty Care Law LLP

As we all know: some lessons in life are not taught in classrooms or textbooks. They are learned through hard-knocks and real-life practice instead. Hello! My name is Min Ju Jennifer Park. I am a practicing lawyer and Partner at Realty Care Law LLP. Although my practice is not limited to real estate law, I will be drawing on my experiences with real estate transactions to share some practical tips that buyers and sellers (and other interested parties) may find useful. 

Move-In Date

For Buyers: Whenever possible, try to avoid moving in on the closing date. Lawyers cannot guarantee the exact time of closing on the day of closing. Most transactions will involve: i) receiving mortgage funds from the mortgage lender in the morning or early afternoon, ii) attending at the bank branch to certify closing funds or wire transfer funds, and iii) transferring closing funds to the Seller’s lawyer at their bank of choice. Although desktop wires can help shorten fund transfer times, it can sometimes cause more trouble. Some wires get held by banking institutions for compliance or fraud audit issues and can be delayed for some time. 

Buyers completing occupancy closings or final closings with Builders (Developers) should similarly avoid making move-in plan on the actual occupancy date. Builder’s lawyers are often working on dozens, sometimes over 100 units in one day, and cannot promise key release on the same day. Some Builders have their own key pick-up appointment schedule that Buyers must adhere to. Make sure you are not booking moving arrangements before confirming key pickup appointment details. 

For Sellers: Whenever possible, try to move out of the home as soon as possible – ideally the day before closing. The Agreement of Purchase and Sale (APS) gives you until 6pm on the day of closing to provide all of your closing deliveries, including vacant possession of the home. However, if the Buyer is moving in on the closing date and the Buyer has sent closing funds to your lawyer much earlier in the day, you may face the awkwardness of some unhappy Buyers staring at you from the curb with their moving truck standing by. Eek.

Selling and Buying on the Same Day (Especially a Friday!)

You should avoid selling your current home and buying your new home on the same day. Although it may seem like an obvious choice to sell and buy on the same day, there are a lot of moving parts involved on the day of closing. It places a lot of time constraints on the sale transaction and subsequent purchase transaction if you schedule them on the same day. 

With the recent challenges that Buyers are facing with mortgage approvals, it is very possible that your sale transaction will be slightly delayed due to the Buyer having problems with their mortgage. If your sale transaction gets delayed because of the Buyer’s mortgage troubles, then your purchase transaction will get delayed in tandem. This means additional costs relating to i) moving or storage costs, ii) mortgage per diem interest, iii) lawyer fees, iv) living accommodations for the length of delay, v) insurance premiums, iv) all of the above costs as incurred by the Seller of your new home, and more. Although the Buyer should be responsible for compensating you for all of these costs, if the Buyer is tight on funds and simply cannot pay, you may end up shouldering some of these costs. All these costs will also need to be calculated on a tight timeline, while you are trying to finish up your move. Friday transactions are especially stressful because this means that any delay will drag on over the weekend.

Instead, I would suggest that you arrange for the purchase transaction to close a week or so in advance with a bridge loan. Although you will incur bridge loan interest charges, I believe it is worth the peace of mind to know that you are already moved into your home; and if the sale transaction is delayed, you can quickly calculate additional interest costs without dealing with another transaction that needs to close on the same day. It also allows you to move out of your current home on a more relaxed timeline. 

I have personally opted to have a bridge loan in place for all my own transactions instead of selling and buying on the same day. 

Chattels (Appliances) (for Buyers)

It is ideal to test appliances prior to signing the APS or during the inspection conditional period. Since we are currently experiencing a Buyer’s market, a prudent Buyer should always insert an inspection condition in their Offer to Purchase, even if you are buying a condominium unit. Whether the Buyer actually hires an inspector or not, appliances should certainly be tested during this conditional period. 

Once the APS is firm and binding (i.e., once all conditions have been waived or satisfied), it can be extremely difficult to convince a Seller to pay any compensation for appliances that are discovered to be faulty before or shortly after closing. The Seller will often reply: “It was working fine this morning. You must have operated it incorrectly.” A Buyer cannot reasonably refuse to close over a faulty appliance issue. This means that the Buyer ends up bearing the cost of repair or replacement in many cases since they do not wish to bother pursuing the matter in court after closing. 

During the inspection conditional period, the Buyer has an option to back out of the APS and is therefore in a much better bargaining position to negotiate compensation for faulty appliances. 

Rental Equipment (for Sellers)

Sellers should always double check the section of the Listing and APS relating to Rental Items. When a Buyer’s Agent prepares an Offer to Purchase, the Buyer’s Agent will likely be relying on the Listing to check whether any appliances are rental items (e.g., hot water tank, HVAC, furnace, water purifier). Sometimes the Seller’s Agent may have relied on outdated information when preparing the Listing. For example, if you replaced your old furnace and opted to rent a new furnace instead of buying it outright, you should ensure that the Listing and APS reflects this updated information. Your Agent will not know unless you tell them. 

If you fail to identify any equipment as a rental item, the Buyer is not obligated to assume (take-over) the rental contract, and you (Seller) will be required to buy-out the rental contract prior to closing or with the sale proceeds! These costs can be around $5,000-$10,000 and can easily be avoided by carefully checking the Listing and APS details.