The idea of closing on your property sale and immediately purchasing a new home on the same day can seem like a streamlined, efficient approach. At first glance, it sounds like a seamless transition from one home to another without the hassle of temporary housing and/or bridge financing. The problem is, this strategy is filled with complexities, risks, and unexpected challenges that can turn what seems like a convenient solution into a stressful experience.
Doormat has teamed up with our friends at WOW 1 DAY PAINTING to share why you should reconsider closing your purchase and sale on the same day, and what other options you have that provide peace of mind and minimize risk and cost.
Understanding the Logistics of Same-Day Closings
Closing on a property is like juggling a bunch of balls at once – there's paperwork, legal work, money changing hands, and a whole lot of logistics. Trying to sell your old place and buy a new one on the same day? That gets way more complicated. Everything needs to click into place just right – from getting the cash lined up to all the final OKs, and hoping everyone else does their bit without a hitch. And life's curveballs? They don't take a break just because you're closing on a house. Delays are pretty standard in the real estate world, and they can throw a wrench in the works, messing up both your sale and your purchase and setting off a chain reaction of headaches.
Before diving into why trying to close on both a sale and a purchase on the same day can be tricky, let's run through what a typical closing day looks like (keeping in mind, this is what happens on closing day in Ontario, and it might be different in other provinces). Here's a quick rundown of what needs to happen to pass the keys from one hand to another. And keep in mind that these steps can’t be done in parallel; they've got to happen one after the other.
Getting the buyer's funds: buyers often need a mortgage to fund their purchase, but they'll also need to contribute some cash from their own pocket since a mortgage doesn't cover everything. The buyer's lawyer collects this contribution before the big day (though sometimes it's a last-minute dash on closing day itself).
Mortgage funds come through: mortgage lenders typically don't send over their part until closing day, which then goes from the buyer's lawyer to the seller's lawyer. It's not unusual for this money to show up in the afternoon.
Sending the funds to the seller's lawyer: once the buyer's lawyer has the total amount, they wire it over to the seller's lawyer. Wire transfers and direct deposits are the standard, but neither option is perfect or instant.
Transfer of property ownership: after the seller's lawyer confirms they've received the funds, both legal teams get to work on transferring the property title to the new owner (that's you!).
Handing over the keys: ideally, you'll grab the keys from a lockbox at the property, but sometimes you have to pick them up from another location, like the seller's lawyer's office.
Those are a lot of steps, but let's add a few other wrinkles to the equation:
Do it all twice: you've got to go through all these steps for both selling and buying, doing the whole dance twice in one day.
Racing against the clock: nearly all of this needs to happen between 9-5, Monday to Friday, to fit within bank and lawyer hours.
If anything misses that window, you're likely pushing everything to the next day. And it's not just the closing stuff – cleaning, painting, and moving out add more layers of complexity and chances for delays. Each additional task increases the odds of something slipping, leading to more stress and that dreaded domino effect.
Financial Risks and Considerations
Pulling off a same-day closing involves a lot of financial gymnastics. You're trying to use the cash from selling your old place to buy your new one, which sounds straightforward but it’s not so simple. If there's any hiccup in getting the money from your sale, it could throw a wrench into closing on your new place. And let's not forget those last-minute costs that always seem to pop up when you're on a tight schedule. They not only add stress but can also mess with your bargaining power, possibly leaving you with a deal that's not what you had originally hoped for.
Let's break it down a bit to see where things might get tangled. You can't even kick off the closing on your new place until the funds from selling your old one are safely in your hands. So, on the big day, you're basically doing the closing shuffle not once, but twice, to make a same-day switch happen. And here's where it gets even more complicated: often, the person buying your place is also juggling their finances, relying on selling their own home to finance buying yours. It's like a chain of financial dominoes lined up and ready to topple at the slightest hiccup, showing just how quickly things can spiral on what's supposed to be an exciting day.
Legal and Contractual Complications
There are a number of legal and contractual complications that can arise with a same day closing. As the purchaser, it is your responsibility (facilitated by your real estate lawyer) to coordinate the delivery of funds to the seller on your agreed upon closing day. If you don’t do this, you are in breach of the contract and can be held liable by the seller. Often, a delayed closing can be negotiated but it can be expensive and is not always possible. It’s something that you’ll want to avoid at all costs as it takes negotiating power out of your hands and puts you in a tough position. Not to mention the additional legal costs.
Also, the pressure and rush to close both transactions on the same day can lead to oversight or errors by all the different people involved in buying and selling property. There is a ton of nuance, communication, and detail involved in every closing and to rush through the process can increase the likelihood of mistakes. Any mistake can cause legal complications, delay the transactions, or even result in breach of contract, leading to financial penalties or legal action.
Don’t discount how the stress of your already busy life can get in the way. You must be available throughout all of this to ensure you are able to greenlight decisions or make tough choices. Your kids being sick, an important meeting or a host of other daily events that jump up out of nowhere, can cause delays and add to the domino effect.
Stress and Emotional Impact
Managing the sale of a property and the purchase of another is no walk in the park. Buying or selling a property is stressful enough, but even more so when both are set to close on the same day. The emotional toll of navigating these complex processes simultaneously can be overwhelming, impacting decision-making and overall well-being. Due to everything outlined in the previous sections, same-day closings significantly increase the risk of something going wrong on your closing day. Closing is already stressful enough, so focusing on your peace of mind rather than trying to save a little bit of money (although it can end up being more expensive if something goes wrong) is highly recommended.
Alternatives to Same-Day Closings
Fortunately, there are safer strategies than same-day closings. Options like bridge loans provide the financial flexibility to purchase a new property before selling the old one. Rent-back agreements or extended closing periods can also offer the necessary breathing room, reducing the rush and allowing for a more deliberate and less stressful transition. All of these should be considered before going the same-day close route and when comparing the costs of the different options, you should consider the costs of a same-day closing when it doesn’t go according to plan, rather than just assuming it will.
Your Support Team Matters
To ensure a smoother transition, planning and professional advice are key. Working with experienced real estate agents, lawyers, trades, and financial advisors can help navigate the intricacies of staggered closings. Ideally all of the people that are supporting you are in contact with each other to further support the team effort to deliver on a successful close. Developing a contingency plan for potential delays can also mitigate risks and reduce stress.
At WOW 1 DAY PAINTING and Doormat, we partner with a number of great professionals to help deliver our services in a cohesive way. We like to be in touch with the other professionals supporting your property closing to ensure that we are all working together towards the same goal, rather than pulling in separate directions.
Even More to Consider
Keep your eyes peeled for Part Two of our series on ‘Why you shouldn’t close your home purchase and sale on the same day.’ The logistics around moving out of your current home and moving into your new home are complex, to say the least. In Part Two of this series, we will outline and provide helpful considerations for why staggering the sale (or move out) of your current home with your new home makes life easier and safer.
Is your new home ready for you to move in? Is it your perfect dream home, or do you want to make some minor or major changes? Do you plan to move all of your possessions on the same day? Consider all the challenges that come with that. How comfortable are you with the risk that a third party will do exactly as they say they will, when you need them to – on your double closing day?
We will help you understand all of the logistical risks and considerations that come with closing your home purchase and sale on the same day.
Wrapping It Up
The appeal of closing your property purchase and sale on the same day is understandable, but the risks and pressures associated with this strategy are no joke. From financial instability to legal complications and emotional stress, the potential drawbacks far outweigh the potential convenience. By considering alternative strategies and seeking professional guidance, you can navigate your property transition more safely and with confidence.
At WOW, we are able to support you with your painting needs under tight timelines. We believe that you shouldn’t have to sacrifice quality for speed and it’s in that niche that we thrive. Ahead of the job, we’ll provide you with a detailed quote, a painting-production-plan and a checklist of everything that you need to prepare in advance. When painting day comes around, we ensure the right number of people are there to get the job done right and on time.
At Doormat, we provide real estate legal services for your residential purchase, sale, refinance, or ownership change of your home. When you’re buying or selling a home in Ontario, you’re required to use a real estate lawyer to close on the exchange and that’s the role that we most often play. We will provide the guidance and expertise you need to navigate the closing process and the transparency and simplicity to make you feel comfortable throughout the entire journey. Get started with us today!
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