One of the most common real estate transactions involve the sale of one’s current home and the purchase of a new home. Many individuals try to synchronize the closing dates for both transactions so that they are buying and selling properties on the same day. Most often believe this to be the best approach with regard to making other arrangements around their closing such as scheduling movers, contractors, etc. However, there are a few other things that individuals in such a situation should consider before arranging to buy and sell real estate on the same business day.
RISKS
The biggest risk you face when buying and selling property on the same day arises in the unfortunate situation where the buyer of your property may be unable to close on the deal. In the event that you are relying on these sale proceeds to close your own purchase, this could leave you unable to close yourself.
These delays or inabilities to close on the specified day can happen for a multitude of different reasons, the most common being an unexpended delay in receiving mortgage funds. For example, if Buyer A does not obtain his mortgage funds in time to close his purchase from Seller A, then Seller A may no longer be able to close on her own purchase from Seller B. As you can see, the causal chain here can have far reaching effects. These concerns are not typically considered by individuals involved in this process, but they are certainly not uncommon.
Another potential delay is if you are purchasing a tenanted property. We have seen situations where it’s closing day and the property has tenants who will not leave, thus creating a situation where extensions need to be negotiated, or in the worst case scenario the deal falls through.
REMEDIES
If possible, it is always recommended the you schedule your sale to close a day or so in advance of your purchase. This way if the buyer of your property is unable close on the day of for whatever reason, you have provided yourself some valuable time. The only downside to this approach is that you may have to find accommodations for the time between moving your possessions out of the property you are selling, until the closing date arrives for the property you are purchasing.
An alternative option is securing bridge financing, a short-term financing option that is offered by many banks to help clients who find themselves in this very situation. Bridge financing works to provide clients with the funds required to close on the purchase of property without requiring the proceeds from the sale of their current property. Once the proceeds from your sale are finally received, a portion of those proceeds will be directed to the lender to cover the loan and any interest owing. This alternative approach allows individuals the ability to move their possessions into their new home without needing to wait for their sale to close first. Generally, this approach makes for a much less hectic and stress free closing day.
Before your Agreement of Purchase and Sale is signed, and conditions are met, make sure to include a clause that the tenants must be out of the property prior to the closing date. If delays happen, at least you will know ahead of time and can work can on a plan b.
At Carson Law we have dealt with and solved a multitude of real estate closing issues.
We are confident that we can close your transaction professionally and efficiently.
Contact Carson Law today.
905-336-8940 x 1000
info@carsonlaw.ca
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