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27 August 2021
Deeded automates onboarding to dramatically speed up closings
The most anticipated part of a Real Estate or mortgage transaction is being done with it. Closing is by nature the most complicated part of buying a home or refinancing a mortgage.
Tying together every loose end and officially sealing the deal involves coordinating dozens of documents and data that come from various sources, often triggering numerous follow-ups and manual tasks.
Above all, when time comes to close a transaction, it is often the homebuyer or borrower that ends up becoming the “quarterback” for chasing down documents, many of which may have previously shared with other parties such as their Real Estate agent or Mortgage agent earlier in the process. Combined, these factors make for a slow, stressful, and highly inefficient closing experience.
“It’s unimaginable how much effort and manual coordination goes into gathering all the documents needed to close on a home or mortgage. Dozens of emails, documents and faxes are flying around for each transaction. It’s grossly inefficient, unsecure, slows things down to a crawl. It’s a huge divergence from what today’s consumer expects. It puts them in a stressful situation, at a moment when they should be happy and excited”. says Reuven Gorsht, Co-founder and CEO at Deeded
At Deeded, our vision is to make the closing experience seamless, transparent, and affordable for all those involved.
We are excited to introduce new onboarding technology within our robust platform that effectively automates the process of collecting the necessary documents and data needed for closing a transaction. Leveraging artificial intelligence and machine learning, we are dramatically speeding up the closing process and reducing the inefficiencies that previously burdened clients, lenders, and real estate professionals.
“Homebuyers are increasingly looking for frictionless ways to simplify the home buying process, all the while having access to expert advice” said Gorsht.
“By automating the most inefficient parts of the process, we divert our efforts to better serving our customers, ensuring they have a seamless experience while drastically simplifying the process for everyone involved in the transaction” added Gorsht.
Customers who have recently experienced our virtual closing process have noted the immediate benefits of the new onboarding technology. Recent Toronto homebuyer Neil said “Working with Deeded made purchasing a home easy. They have excellent online systems for intaking the request and the signing process. Their responsive and clear communication made the transaction easy and provided reassurance in what can otherwise seem like a complicated process.”
“While we’re already seeing tangible progress in making the architecting the Real Estate transaction of the future, we’re continuing to relentlessly focus on making the closing experience frictionless, transparent and affordable. This is just one of many game-changing innovations we plan to introduce as we reimagine the Real Estate transaction” added Gorsht.
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26 July 2021
Behind the scenes: What happens on closing day
One of the biggest questions during a Real Estate transaction is “when do we get our keys?”
Before getting your keys, there are several steps that need to be completed first and this all (believe it or not) happens behind the scenes on closing day.
What is Closing Day
Closing day is the day when you take legal possession and finally get to call your new house your home. Prior to closing day, the buyer will be signing and reviewing documents prepared by the lawyer with regards to their mortgage loan, down payment, closing costs & purchase price. They will also review a statement of adjustments, which outlines the final closing numbers. Lastly, the buyers must arrange for funds to be deposited in the lawyer's trust account, while the lawyer requests the remaining funds from the mortgage lender. The funds are then transferred to the seller's lawyer who releases the property to be registered in the buyer's name, along with a mortgage (also called charge) which will be registered in the favour of the lender.
When Should You Schedule Your Closing Day?
Picking a closing day may seem like a simple decision, however there are many factors to keep in mind to avoid major issues from arising. Picking a closing on a Friday may cause issues if you cannot get everything before 5:00pm, businesses and systems will close for the weekend leaving you unable to close which may cause you to pay extra costs. The same principal is recommended for avoiding closing days before long weekends.
In addition, you should also keep in mind, Real Estate transactions peak in month-end especially during the Spring. Be aware this means everything, and everyone will be busier, such as movers, lawyers, realtors, and lenders. Therefore, it may be more difficult to ensure all parties are available and able to attend your closing. Overall, it is recommended to avoid picking a closing day before Fridays, long weekends, and month-ends wherever possible.
What Happens on or near Closing Day?
On the actual day of closing there are a number of tasks that must be completed by each party before the keys can change hands.
- • The buyer will sign a variety of documents prepared by their lawyer relating to the mortgage loan, and the purchase of the home.
- • Your lender will send the mortgage funds to your lawyer.
- • You must provide the rest of the purchase price to your lawyer as well as the additional closing costs.
- • Your lawyer transfers the funds to the seller's lawyer.
- • Your lawyer will register the property in your name with the Land Title / Land Registry Office. If applicable, they will also register a mortgage (also commonly referred to as "charge") in favour of your lender.
- • You will receive a closing report, which includes a copy of the deed/transfer of title.
- • Your Lawyer will provide instructions on how and where you can get your keys. At Deeded, we will typically arrange for lockbox so you can easily access your new property.
- • Additionally, please make sure you contact all appropriate utilities to inform them you are the new owner (i.e., hydro, electricity, water, condo fees, taxes etc.) so they can update their billing information.
As you can see, there's a whole lot that happens on or near your closing day, with most steps happening behind the scenes. The goal is to have all these tasks completed by 4pm to 5pm which is when many agencies and lenders close for the day. If the deadline isn't met, the closing is typically extended to the next business day. Hence closing on a Friday or before a holiday weekend is not recommended.
Additional Closing Costs
- • Your Deposit- The deposit is a portion of the total home purchase price that will be paid out-of-pocket by the buyer. Typically, the down payment is between 5-20% of the total purchase price.
- • Land Transfer Taxes (LTT) – The LTT is calculated as a percentage of the purchase price of your home. The exact percentage varies from province to province and sometimes individual municipalities like Toronto have additional costs. Alberta does not have LTT.
- CMHC Insurance – Should you use less than 20% for your down payment, you will be required to obtain CMHC insurance. This is an insurance policy that protects your lender should your borrower default on your loan repayment.
This is not an exhaustive list, visit this blog for additional information on closing costs, however we always recommended speaking to your realtor and lawyer to ensure you know exactly what your circumstances will be at closing.
Can Deeded Help with My Closing?
Of Course! When it comes to purchasing a home, our team at Deeded strives to make the process as easy as possible so you can “close” and get your keys as quick as possible.
Our team helps you understand your obligations, help you navigate the legal documents that need to be signed before funds are released to you and can expedite the closing process, all to ensure you have a fantastic closing experience. Please feel free to contact us anytime.
Final Thoughts
The closing process is a complicated and high-stress event, not just for the buyers and sellers but the realtors, lawyers, and lenders as well. Although it is understandable that you want the closing process to be done as quickly as possible, being patient will help things go much more smoothly.
If you have any further questions our experienced team is ready and able to make your closing a simple, quick, and painless process. Feel free to contact our team if you have any questions on our closing procedure, and to obtain a quote, please click here.
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26 July 2021
Five most common title transfer issues
A title is a legal term that means registered owner of a property. A title transfer is assigning ownership, or part of the ownership to another party.
When purchasing a property, the title must be transferred from the seller to the new owner. However, it is not always as simple as signing a document, a large number of properties may require work to "clean up" issues with a title.
Here is a list of the five most common issues:
Property has a Lien
If any of the previous title holders had outstanding debt, such as unpaid property taxes, general contractor bills, or a judgement from the court to pay off a creditor, those companies may have placed a lien on the property.
A property lien is a legal claim on assets that allows the holder to obtain rights to the property if debts are not paid. If there is a lien on the property you are purchasing, you may inherited it upon closing.
This is an example of a very common issue that can be resolved by your lawyer on closing. Using a title search will identify if there is a lien on the property and you can work with your lawyer to address and resolve the issue.
Boundary Disputes
If you will not be getting a survey on your potential property before closing from the sellers you run the risk of having a boundary dispute with neighbouring properties. A boundary dispute is somewhat common and the only way to resolve this issue is through an up-to-date survey on the property.
Your Real Estate lawyer may recommend a property survey if there is evidence to suggest it would be beneficial. However, this is quite often not the case, few closings include property surveys because of the cost and length of time it takes to complete. Without taking proper protection, this potential issue could be a serious financial burden to resolve.
This is a case where title insurance is a great option to mitigate some of the unknowns and protect future interests in the property.
Illegal Past Deeds and Fraud
There are a number of illegal actions that may impact the sale of a property and the transfer of a title in the future. That could include deeds made by minors, people lying about their marital status, an undocumented immigrant. Illegal past deeds such as this may pose an issue to the transfer of a title and cost significant amounts to rectify.
In addition to the above illegal actions, fraud is another potential issue that may impact title transfers but is much more difficult to identify. When a lawyer conducts a title search you can identify anything that can be searchable through public documents and registrations. However, fraud is often undetectable through these available documents making it one of the most difficult of these common issues to protect against.
Undiscovered Encumbrances
When you purchased the property, you may not have been aware that a third-party may hold claim to part or all of the property from a previous event such as a lien. This may limit what you as the owner will be able to do with the property. These limits are known as encumbrances and are placed on the property itself, not the owner.
A real estate lawyer for title transfer will help discover if the property in question has unknown encumbrances. Some encumbrances are welcomed by owners, such as zoning laws that restrict properties in an area from being used for commercial purposes. Others can be more troublesome, like liens placed on a property that seek repayment of debt.
Almost all property, particularly in densely populated areas, is encumbered in one way or another. That is why it is important to have a knowledgeable real estate lawyer by you side when learning if there are encumbrances on a property
Public Record Errors
Whether it be adding an extra zero or misfiling a document, public record errors do happen. Unfortunately, when filing and clerical errors occur, they are often difficult to detect or notice because sometimes they blend in easily. Dealing with public record errors can cause serious financial stress on the title owner and be very time consuming to rectify.
How Can I Protect Myself?
Throughout this article we’ve listed all issues that may arise from a title transfer and likely caused you lots of anxiety. You're probably wondering now, what can I do to protect myself from all these problems. The answer is simple, get title insurance.
While every policy is different and we recommend checking your specific policy for the details, but in general, title insurance will cover you for all of the above title-related issues and more that can affect your ability to sell, mortgage, or lease your property in the future, or its value.
Final Thoughts
When conducting a title transfer on a property it’s wise to use an experienced real estate lawyer that can help you ensure you have proper protection and don’t ignore any serious issues. If you have any further questions, rest assured that the Deeded team is here to support you in any way we can.
Send us an email and we would be happy to answer any questions you have or provide recommendations for your situation.
Important Note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
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18 June 2021
Understanding the Statement of Adjustments and Trust Ledger
The Most Important Documents in your Closing - Statement of Adjustments and Trust Ledger Statement.
When you’re buying or selling a home, you will likely encounter two important documents called a Statement of Adjustments and a Trust Ledger Statement.
These two documents are the two that get the most attention from the buyer or seller, and are incredibly important because they help you make sense of the all costs and expenses that are associated with buying or selling a home.
To ensure that you manage your budgets and have a smooth closing, understanding your statement of adjustment and trust ledger are vital. They allow you to easily see the breakdown of all expenses and know decisively how much you will owe at the end of the day if you're the buyer, or how much you should expect to receive if you're the seller.
The way these documents are formatted is more like an accounting statement. We know not everyone has an accounting degree, so follow along and you'll be able to understand these statement in no-time.
What is a Statement of Adjustment?
A statement of adjustment is very similar to your personal bank statement, however, instead of listing your personal transactions, it is a record of your Real Estate or Mortgage transaction. Statements of adjustment are used by both buyers and sellers to know exactly the proceeds they receive, or how much they owe to complete the transaction.
Essentially, the statement of adjustment will list the purchase price for the home followed by any additional costs that need to be added, finally subtracting any deposits already made to determine what will be the total cost at the time of closing.
Example of a Statement of Adjustments
Like an accounting statement, when creating a statement of adjustments, costs paid to the seller go under "credit seller". Whereas costs paid by the buyer go under the "credit buyer" column.
Here's an example for a residential property sold in Ontario.
- The sale price is $500,000
- There was a deposit of $50,000 made by the buyer
- The seller pre-paid utilities at a cost of $500, however they only occupied the house for 150 days and need to be reimbursed for the half, therefore $250 will be credited.
If you’re reading this correctly, the buyer will owe the seller $450,250 on closing, after accounting for the deposit and utilities adjustment.
What is a Trust Ledger?
Similar to the statement of adjustment, both the buyer and seller’s lawyers will create a trust ledger, this time with the purpose of showing how the money will be allocated after the closing. If you are refinancing your mortgage, your lawyer will also prepare a trust ledger statement with the details of mortgage changes.
A Trust Ledger Statement is prepared for both the buyer and seller to show all remaining expenses for both parties. In the case of the buyer, after completing the statement of adjustments, the full amount payable to the seller is then moved over to the Trust Ledger Statement.
The Trust Ledger Statement shows all of the money involved in the transaction on closing day, but also includes other costs such as legal fees and disbursements, land transfer tax, title insurance, etc.
For sellers, the closing costs they have are subtracted from the amount owed to them by their buyer to determine the total amount they will receive after closing (after a mortgage is paid off, for example).
Example of Trust Ledgers
In contrast to the statement of adjustment, a trust ledger will vary between a buyer and seller because they each will incur different costs after closing.
The Trust Ledger Statement shows the remaining expenses for both the buyer and seller on closing day, including legal fees and disbursements, realtor fees, land transfer tax, and so on.
We will create an example trust ledger for the buyer in the previous example assuming he has incurred the following closing fees.
- Legal fees - $4,800
- Home inspection fees - $1,200
- Land transfer tax - $12,000
The seller's trust ledger will similarly start by bringing the price paid and subtract any associated closing costs to determine the total earnings from the sale for the seller.
We will create an example of the seller’s ledger assuming the seller pays the below closing costs.
- Legal Fees - $2,200
- Real Estate Commission - $25,000
As your purchase, sale or refinance transaction moves towards closing, you’ll receive copies of the Statement of Adjustments and Trust Ledger to review for accuracy. It is important that you take the time to understand, review and ask any questions.
If this looks overwhelming to you, rest assured that the Deeded team is here to make things easier and simpler. We walk you through all your documents and ensure that you understand every aspect of your transaction.
Important Note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
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18 June 2021
Independent Legal Advice (ILA) and when you may need it.
There are certain situations when purchasing or selling a property or refinancing your mortgage, where one or more of the parties to the transaction will require independent legal advice (ILA).
ILA is the process where an outside, unbiased lawyer is retained by one party for the limited purpose of providing advice on the real estate transaction so the individual appreciates the nature and consequences of a decision that must be made.
Key Takeaways:
- • Under certain situations such as conflict of interest of joint retainers, you may be required to obtain independent legal advice. Your mortgage lender may also require ILA to qualify you for a loan.
- • ILA will help ensure you understand all legal aspects of the closing and any agreements or contracts you sign and will also provide you with a certificate upon completion.
When Would I Need ILA?
According to the Ontario lawyer’s rules of professional conduct, you would be required to obtain Independent Legal Advice (ILA) under several circumstances.
- • When there is a potential conflict of interest, a lawyer may still be permitted to act for a client but will be required to advise the client to seek independent legal advice. This is to enable the client to fully understand the implications of a conflict of interest.
- • A joint retainer occurs when two or more people hire the same lawyer to represent them for a shared purpose, such as a real estate transaction. In this scenario, lawyers are advised to recommend that their clients seek independent legal advice.
- • If a lawyer finds out that they have made an error or an omission that could be damaging to the client’s case, the client should be advised to seek independent legal advice.
Should you decide not to obtain ILA during a real estate transaction, there may be consequences. For example, the contract that you sign may not be legally enforceable should the courts deem that you were not properly informed. In addition, certain mortgage lenders may require you to obtain some form of ILA in order to qualify for your loan. Be sure you understand your circumstances before you make a decision.
What Will Happen When I Get ILA?
When you seek independent legal advice, you will meet with a lawyer who will confirm that you fully understand all legal aspects of your transactions. Including benefits, liabilities and any legal ‘jargon’ they may not fully understand. At Deeded, our lawyers can provide an ILA using our virtual technology, meaning you won't have to come into the office. Instead, you'll meet the lawyer over a secure video conference.
When looking for a lawyer to provide you with legal advice, you should ensure they offer the following services:
- • Review your purchase/sale agreement and all other legal documents and attachments.
- • Provide consultation and advice for agreement and all other legal documents.
- • Provide you with an independent legal advice certificate upon completion of their services.
- • If you are seeking convenience, will the lawyer provide an ILA over a video conference or other remote technologies?
When do Lenders Require ILA?
In many situations it may be the mortgage lender that will require persons to obtain ILA in order to qualify for the loan. ILA is typically required to be obtained by the legal titleholder of the property. This is meant to ensure that they receive a simple explanation of the nature and obligations contained in their mortgage agreement from an impartial third-party lawyer.
In addition to the title-holder, lenders may require non-title holding spouses or other individuals involved in the transaction such as a guarantor or covenantor, to receive ILA as well. This is to ensure that they also receive an explanation of their obligations as they may become liable for repayment of the mortgage loan and observance of the mortgage obligations under certain circumstances, such as the death of the title-holder.
In most circumstances, the requirements from the lender on who will need to obtain ILA will be set out before-hand in the mortgage commitment. If it's not, we would recommend taking the initiative to bring this up with the lender, whatever the result is make sure you take clear written instructions in case you ever need to refer back.
If this looks overwhelming to you, rest assured that the Deeded team is here to make things easier and as simple as possible. We will walk you through your situation and help you understand what requirements you have and what steps you need to take to protect yourself and ensure that you understand every aspect of your transaction.
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16 June 2021
Should I Be Drafting My Own Agreement of Purchase and Sale?
Some homeowners or home buyers have contemplated at some point whether they should be buying or selling their home without the help of a Real Estate agent, or privately as it is commonly referred to.
We are not going to debate the reasons for and against buying or selling privately. We believe that Buyers and Sellers need to understand the pros and cons of using certain professionals in their transaction, and ultimately, it is entirely up to the individual Buyer or Seller to decide what resources they may or may not want to use for their purchase and sale.
What we have seen lately is Buyers and Sellers who are completing their transactions privately and are drafting their own agreement of purchase and sale; occasionally using templates and forms from the Real Estate boards and associations, or the similar forms to what Real Estate agents are using.
There is one positive aspect about using templates and drafting your own Agreement of Purchase and Sale in order to negotiate your private transaction and that is, it is better than a hand-shake after all. When an Agreement is signed by both parties and consideration is provided, it becomes binding. Which means all parties are now obligated to fulfill the terms and conditions of the said Agreement.
While the “do it yourself” (DIY) drafting of a contract method may work for purchasing a used car or some simple low-cost items, a home is one of the largest purchases you will ever make. A mistake or an issue with an Agreement can end up costing you a significant amount should things not play out the way you have expected them to.
That is why it is almost critical to have your Agreement reviewed by a lawyer prior to signing. No matter how simple or straightforward you may believe the Agreement to be. We have seen DIY Agreements that missed inclusions of appliances (imagine moving into your new home only to discover the seller took all their appliances while you were assuming they were included). All the way to incorrectly describing the property or land. Ultimately, minor mistakes can become costly in the end.
But I’m Using the Same Forms Real Estate Agents Do, What Can Go Wrong?
On a practical level, Real Estate forms are the standard way to contract for a Real Estate Purchase or Sale. However, there are issues right off the bat with using real estate templates.
First, most forms are copyrighted and licensed by the Real Estate boards or brokerages. For example, in Ontario, OREA licenses its forms to their members and the OREA purchase and sale form is used as a standard by Real Estate agents across Ontario.
Even though they are readily available by doing a simple Google search, you may be infringing on copyright or licensing agreements if you are not licensed to use the forms. Second, forms that are found online may be outdated or may have been modified, sometimes in undetectable ways.
The other thing to keep in mind is that Real Estate agents are licensed, regulated and insured. When a Real Estate Agent writes up an Agreement, they have been trained to do so through their licensing process, by their brokerage, or through experience of putting together many Agreements.
They are also insured by an errors and omissions policy. Say your agent made a mistake on the Agreement, which caused you financial damages. Your agent (or their insurer), would be responsible for any claims and settlements.
When it is you who writes the Agreement, no matter if it is on a Real Estate form, you are not insured. Therefore, any claims for a mistake you may make, must be paid out of pocket.
Can I put the Agreement Together and Have a Lawyer Review?
Yes you can, an experienced Real Estate lawyer works with Agreements of Purchase and Sale on a frequent basis and has the experience to spot any potential issues. A lawyer can either review an Agreement you have put together prior to signing, or offer to draft an Agreement for you from scratch.
How Much Will it Cost to Review an Agreement?
It is probably less than you think. Especially if considering the peace of mind and potential risks you may be taking. At Deeded, we would be happy to help review and/or draft your Agreement and provide you with a quick turnaround.
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