Look for lawyers refund after closing

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The long awaited day has arrived: the visit to the lawyer's office to sign for property transfer and mortgage on your new home.   And, to bring in the rest of the cash needed to complete the purchase.

You will be something called a Statement of Ajustments or Consolidated Cost Estimate-Buyer, or title by any other name that serves the same service.   The lawyer is providing a balanced credit and debit explanation for the expenses of buying the home.

On the credit side, you will see:

  • the deposits you have already made,
  • Taxes levied the sellers will have owed while they owned the property
  • Community association charges related to the tile not yet paid by the seller
  • your mortgage proceeds
  • and the balance of cash the lawyer asked you to bring

On the cost or debit side, you will see:

  • the price of the home
  • mortgage may have an interest adjustment to set payments properly
  • Taxes prepaid by the seller
  • condo fees prepaid by the seller
  • community association charges prepaid by the seller for the time you will own
  • lawyer's legal fees
  • land title fees for the title transfer and for the mortgage
  • title insurance
  • adjustments for prepaid utilities ( not common- usually with oil fired furnaces)
  • estimated interest to sellers, in case of late closing
  • estimated contigencies, incidential disbursements, float, closing reserves

The credits and costs will balance.   For example, $500,000 on one side for credits will equal $500,000 for costs/debits.

Now here is why you should be looking for a refund about a week after your close.   For thousands of years, lawyers have understood that it is easier to write a refund cheque than try to collect for a mistake in the accounting once people have moved into their new home.

So, the "estimates, contigenciess, incidential, float, closing reserves" are typically a padding of the accounts in case they have made a mistake or new information comes to their attention.   What new information?  If the municipality recently makes a firm change to the mill rate for the current year property tax it may have to be adjusted if announced just prior to closing and is missed.

But, the others?  If the lawyer is providing a provision for paying the sellers interest it means they are building a contingency fund in case the title does not transfer and the vendor does not get his money on the day the purchase contract stimpulates.  The interest they are due for late closing is set out in the purchase contract.   To avoid a late closing and these interest charges it is always best for the lawyer to get the title transfers and mortgage documents sooner rather than later.  But, even if documents arrive late for registration but are signed by the closing date, a lesser cost remedy maybe title insurance. In some cases, with "Western Protocol", the mortgage lender (mortgagee) will allow the advance of funds even though the mortgage is not yet registered at land registry.

The moral of the story?   Check with the lawyer a week or so after the closing to see about getting the final statement of adjustments- and quite possibly a refund cheque!