What really happens on closing date

Welcome to The Closer's Checklist, where I identify insights, learning, and experience from my 15 years as a BC Notary to help you and your clients close residential real estate deals in BC safely and cost-effectively.

You can learn more about me and what I do as a BC Notary through my work at TNG Legal Services MDP here or through my work at The Notary Group here.

Let's get into it!

Closing dates can be painful

Closing dates have extremely tight deadlines, with little to no room for forgiveness. Completing a real estate deal is not a "participation award" kind of work, where everyone gets a "good job" high five at the end of the day, regardless of how things went.

If the work goes wrong, buyers can be homeless and sellers can be out of significant amounts of monies. Buyers, sellers, REALTORS?, mortgage brokers, BC Notaries and lawyers can all find themselves liable for significant expenses, or even involved in lawsuits.

Scroll to the bottom of this article for tips on how to help your BC Notary or lawyer make your client's closing date go down smoothly.

The basics of a closing date

Closing date (also called the completion date) is the date when the property is registered in the buyer's name and the purchase funds are sent to the seller's legal representative for disbursement.

In other words, it's the date title is exchanged for money. There is a lot of work done both before and after the closing date on every conveyancing file, but this is the date around which all of that work revolves.

The closing date is set out in the contract of purchase and sale between the parties, and it's a firm and binding date. The BC Notary acting for the buyer usually does the majority of the paperwork on the closing date.

The process to complete a standard real estate transaction in the BC Land Title Office system generally takes 2-3 hours, assuming everyone is organized and has all of their ducks in a row.

The problem is that so many things in a closing need to be organized, and many of these things are simply out of the control of the legal representative managing the file. If anything goes slightly sideways, it can take an unexpected number of hours or days to get the deal over the finish line.

Getting the paperwork ready

Seller's documents

The seller's BC Notary or lawyer needs to make sure that the seller has properly signed all of the relevant documents, and that these documents are back in the hands of the buyer's BC Notary before the closing date.

Generally the seller will meet with their BC Notary 1-2 days before the closing date to review and sign these documents. This gives everyone a few days to sort out any last-minute issues which might crop up.

The documents signed by the seller are usually sent to the buyer's BC Notary the day before the closing date.

Buyer's documents

The buyer will meet with their BC Notary about 3-5 days before the closing date to review and sign documents. In many cases, the buyer can now sign a number of these documents electronically. Some documents (notably transfers and mortgages) still need to be signed in person.

The buyer's documents will include a financial statement setting out the funds required to close the transaction, various searches of the property, the land title office documentation, and any required mortgage documentation.

Getting the money ready

The buyer's BC Notary or lawyer needs to get all of the buyer's funds ready and in their trust account before they proceed to registration.

In a perfect world, this happens either the day before completion date, or as early as possible on the morning of the completion date.

The money needed includes:

• excess deposit funds from the buyer's realtor's firm
• mortgage funds
• the buyer's cash to close funds

The trickiest part of this process is getting lender funds. Even if the buyer has met all of the lender's conditions for funding, there may still be reasons why the funding doesn't show up in our trust account until very late in the day (or even not at all!).

These delays could happen because:

• the lender is short-staffed or has too many inexperienced staff
• the completion date is a very busy one
• the lender's funding process is complicated
• the buyer has refused or been unable to get insurance coverage
• a title insurer refuses to issue a policy for the transaction, or decides to ask a significant number of additional questions before they will issue the policy
• the lender doesn't do the funding directly but instead uses third party intermediary managers

In most cases, we don't start the registration process until we have all of these funds in our trust account. We need to follow significant trust accounting rules when receiving and recording trust funds, which adds an important record-keeping layer to the work.

Registering

Registration of transfer documentation for the BC Land Title system takes approximately 1 1/2 hours.

The process to register is:

• we true up the documents from all sources
• we digitally sign the documents
• we do a "pre-title" search to make sure no surprises have shown up on title
• we submit the documents for registration
• we wait an hour and then do a "post-title" search to make sure our documents are pending, and no other charges or registrations have snuck in before our submission
• we download copies of the submitted documents for reporting

The process for registering manufactured homes and First Nations properties is significantly different.

Reporting

Once we've registered, we send the seller's BC Notary or lawyer the net sales proceeds. We follow an agreed-upon and very specific set of protocols for this process.

The amount of money changing hands on closing date is significant, and is subject to very strict trust auditing rules, so it is either wired or delivered physically to the seller's firm. We cannot "etransfer" this amount of money.

This often means we will send one or more runners to banks throughout the day, and those runners will stand in line-ups at banks to deposit funds to the trust account for the seller's legal representative. If the bank closes before we can make it, then the deal could be in danger. If we wire funds, the delivery time is completely up to the banks - funds can often arrive the next day through no fault of our own.

Once the money has moved around, we need to send report letters to Realtors and the seller's legal representative. This usually takes about 30-60 minutes to generate the documents, put supporting paperwork together with them and send them out.

Dealing with wobbles

If anything goes wobbly on the closing date, time needs to be taken to figure out what the issue is and work on resolving it.

If the issue is an easily resolvable one (someone missed putting a date on the documents somewhere), great. We fix it and move on.

But if the issue is not easily resolvable (the mortgage won't fund, or the seller can't clear title), then this can cause significant delays or an outright failure.

Wouldn't hiring a lawyer make this simpler?

Nope. The process and standard of care is exactly the same for both BC Notaries and lawyers.

Many folks think it's better to hire a lawyer for real estate closings because "lawyers can go to court if something goes wrong".

While it's true that lawyers can "go to court", only properly trained litigators actually do go to court for their clients. Conveyancing lawyers (and BC Notaries) have a completely different set of skills.

Conveyancing lawyers can also find themselves in a significant conflict of interest - if they have contributed to the failure of the deal, how can they properly sue themselves on behalf of their clients?

BC Notaries do a significant amount of real estate closings throughout BC. We have a significant amount of training and education, and something like $19 million in errors and omissions insurance (compared to a base of $1 million for most lawyers). We are even trained in mediation, which helps immensely when managing wobbly deals.

If your client ends up needing to go to court, they will need a litigator to help them with that regardless of whether they used a BC Notary or lawyer.

Litigators are specialists who are very well trained in how to succeed in a lawsuit - this is a very different set of skills than those required by a conveyancing lawyer or BC Notary.

It's similar to a family dentist referring a client out to a specialist like a periodontist or oral surgeon when the client needs extra, more specialized help.

Responsible conveyancing lawyers will never pretend that they could represent a client in court - they will always refer the client out to a litigation specialist if the deal has failed.

Ways to make things go more smoothly

Here are a few tips to help your BC Notary or lawyer have a smoother closing date:

• pick a good closing date
• avoid back to back deals
• encourage sellers to review and start the process to clear title immediately on listing the property (if not sooner) - removing a deceased person or clearing up liens and judgments is a process that can take months
• encourage buyers to complete all of the work required to finalize their lender's requirements as soon as possible, so we don't get mortgage instructions a day or so before closing - two weeks is far more manageable
• if your client is using a Power of Attorney, get that original Power of Attorney in the hands of your BC Notary or lawyer as soon as possible so we can see if it's valid, usable, and registered in the appropriate registry

In Closing

Closing dates are stressful, and filled with drama.

Most BC Notaries and conveyancing lawyers are very good at managing that drama, but they can't control everything.

The more you can do to help your clients be organized and on time with their paperwork and deadlines, the better.

The messier the deal, the more expensive it will be.

Have questions? We'd love to chat. Email us at info@thenotarygroup.ca with your questions!