Buying a home is a significant financial commitment, and it involves a lot of paperwork. It can be daunting to try to understand all of the documents you will be asked to sign, so we've put together this post to provide an overview of the most common documents you will encounter as a purchaser in a real estate transaction.
Most purchase transactions include three types of documents:
Those that the purchaser must provide to the seller;
Those that the purchaser must provide to the lender; and
Those that the purchaser must provide to their lawyer.
Deliveries to the Seller
In most cases, the purchaser will only have to provide the seller with two documents, the Direction re Title, and the Undertaking to Readjust.
The Direction re Title identifies the purchasers whose names will appear on title, the birthdates of the title owners, and how ownership will be split in the case of multiple owners. If there is an off-title purchaser whose interest in the property will be held in trust by the on-title owners, their name does not need to be listed on the Direction re Title.
The Undertaking to Readjust is a promise by the purchaser to readjust credits applied to the purchase price after closing if it is discovered that one of the parties incurred a cost that ought to have been borne by the other party. A version of this document will also be signed by the seller, so that there is a mutual promise to readjust if necessary. For example, if the seller claimed to have paid the full property tax amount for the year, then the buyer receives a bill for unpaid taxes, the buyer will rely on the seller’s Undertaking to Readjust to receive a reimbursement.
There may be additional documents required depending on the circumstances of your file, but these are the documents the purchaser must sign in every transaction.
Deliveries to the Lender
If you are financing your purchase with a loan, whether that be a mortgage or line of credit, the lender will require you to sign several documents to secure their interest in your property.
The Cost of Borrowing Disclosure Statement, (which may be referred to by other names, such as Personal Credit Agreement), is a document that outlines the terms of the loan you have agreed to, including the principal amount of the loan, the interest rate, additional costs you may be paying with your mortgage such as property taxes, the frequency of your payments, the term length, amortization period, and the total principal and interest you will be paying over the length of the mortgage term. It will likely also disclose fees you may be charged, prepayment privileges, and prepayment penalties.
The Acknowledgement of Receipt of Standard Charge Terms confirms that you have received the Standard Charge Terms of your mortgage (which are usually presented to you at the same time as the Acknowledgement). The Standard Charge Terms are the basic terms of the mortgage, including definitions for common terms, explanations of how a mortgage works, what happens if you default on your mortgage, etc. The lender is required to provide you with a copy of the Standard Charge Terms, which is why they in turn require you to sign an Acknowledgement of Receipt.
Some lenders will require you to sign other documents with your lawyer, such as a direct debit form allowing the lender to withdraw funds directly from your account, a statutory declaration confirming you will occupy the property after closing and will not obtain secondary financing, and an assignment of rents if the property you are purchasing is tenanted.
Deliveries to the Purchaser’s Lawyer
Some of the documents are provided by the purchaser to their lawyer to codify instructions.
Many lawyers will begin by having their client sign a Retainer Agreement, which generally outlines the work the lawyer has been hired to complete, and the hourly rate or agreed flat rate of the lawyer and support staff that will be working on the file. If multiple clients are hiring the same lawyer to act on a joint venture, the document will also disclose the fact that a lawyer cannot act on conflicting instructions from two or more clients or withhold information from any one client that was disclosed by one or more of the others.
The lawyer will also present the client with drafts of the documents that will be registered on title - the Transfer, and the Charge - and an Acknowledgement and Direction for each document. The Transfer is the document showing ownership is being transferred from the seller to the buyer. It used to be called the “Deed,” and is the document you can point to as evidence that you own the property. The Charge, similarly, records the lender’s interest in your property. The Acknowledgment and Direction for each document indicates two things: that the buyer has acknowledged the information on the Transfer or Charge is accurate, and has directed the lawyer to register the information as it appears in the drafts.
Signing Document Virtually
Signing closing documents is an essential step in the real estate process, as it signifies the transfer of ownership from the seller to the buyer, and the registration of interest in the property by the lender. At Doormat, we understand that this can be a stressful and time-consuming process, which is why we offer the option to sign your closing documents virtually. This allows you to easily and securely sign your documents from the comfort of your own home, without the need to travel to a lawyer's office or other location. Contact us today to learn more about how we can make the closing process easy and stress-free.