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Why You Should Avoid Buying and Selling on the Same Day (Part 2)

By Kormans LLP

Have you ever played dominos? Then you know a line up of only 100 dominos is more likely to fall successfully than a lineup of, say, 200 dominos. Why? Because with 200 dominos, you have doubled the opportunity for human error: the more dominos you line up, the more likely it is that there is a gap in the line.

The same logic applies to selling your old house and buying a new one. Reduce the length of the chain (sell and buy on two different days), and you reduce the likelihood for error. Sure, it is an attractive thought to have your sale and purchase close on the same day. It might seem simple, even. But in reality, it is much more complicated.

So, what has to go right? What can go wrong?

 

STEP 1: YOUR SALE

What must go right:

  • The Buyer in the sale of your old home has to get your lawyer closing funds as soon as possible on the day of closing. Once funds are received, both lawyers transfer the deed.

What can go wrong:

  • The Buyer sends funds, but is too slow
  • The Buyer’s lender is slow to send funds
  • The Buyer is also closing on their sale on that day and are waiting for funds to come from their Buyer.
  • The Buyer fails to send any funds and ask for an extension

Just like you, your Buyer has until 6:00 p.m. to send funds. Lawyers work together as much as we can, but sometimes despite best efforts, funds only reach Sellers just before 6:00 p.m. Contractually, the Buyer has done nothing wrong. Remember: your Buyer has no legal duty to help you close on your Purchase.

 

STEP 2: YOUR PURCHASE

What must go right:

  • Your lawyer needs to receive funds from the Buyer, send them to the Seller’s lawyer by 5:00 p.m., and the Seller’s lawyer must receive funds by 6:00 p.m.

What can go wrong:

  • Banks cannot send wires after 5:00 p.m., so if your lawyer gets funds too late in the day your lawyer might not be able to send funds.
  • Your lawyer does not delay and sends funds just before 5:00 p.m., but funds do not register in the Seller’s account before 6:00 p.m.
  • You close on your sale, but not on your purchase. The consequence: you need to move out of your old home, but you cannot move into your new home.

Remember: Lawyers cannot control banks. When large sums of money are sent by wire, banks conduct fraud checks to make sure no fraudulent transfers go unnoticed. These fraud checks unavoidably slow down the movement of money on the day of closing.

 

Realistically, sometimes you have no choice but to close both sale and purchase on the same day. So, what can you do to make things go smoothly? Be proactive and ask questions. It is critical that you retain experienced legal counsel and is ready to go to bat for you to make two closings happen.

A good lawyer knows all the moving parts and knows how to get them lined up.  Your real estate lawyer should notify the Buyer and Seller’s lawyer that you are closing two transactions that day: the Buyer’s lawyer needs to know that they cannot wait to send funds and the Seller’s lawyer needs to know that they will likely receive funds late in the day and should be ready-to-close as soon as the time comes. To save yourself the extra stress, you can move your belongings to storage, so you do not need to worry on the day about the Buyer coming to the property even if you have not closed on your purchase yet.

Kormans LLP is here to help you close your same-day sale and purchase. We proactively do everything in our power to leave nothing to chance on the day of closing, communicating firmly with banks, and the lawyers on either end of your transaction, to make sure your transactions close without a hitch. Because at Kormans LLP, we firmly believe that the only thing our clients should be worrying about on closing day, is unpacking.

 

Don't forget to read Buying and Selling on the Same Day (Part 1)!

 

 

 

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Amy Jephson

 

Amy E. Jephson is an Associate Lawyer at Kormans LLP. Her practice areas include Real Estate, Wills & Estates, and Family Law. You can reach Amy here: ajephson@kormans.ca.

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